Vinati Organics - ATBS Spread Contraction A Key Monitorable: Nirmal Bang

Nirmal Bang Report

Our research suggests that ATBS spread has contracted further from January 2024 (after hitting a 10-year high in June 2023) and poses a risk to the overall margin assumptions as ATBS (~30% of the revenue) is the highest margin product for Vinati Organics Ltd.

While we are building in ~20% ATBS volume growth in FY25 and FY26 each (factoring in 50% capacity expansion by the end of FY25), spread contraction could have 5-7% impact on ATBS gross margin, as per our calculations.

Newly commissioned projects present a promising case for earnings acceleration; however, demand recovery and competitive intensity in antioxidants, MEHQ, Anisole, etc. remain the key.

Incremental return on capital employed could be lower, in our view.

Maintain Sell with a revised target price of Rs 1,300 after rolling forward valuation to FY26E earnings (25 times price-to-earning versus 30 times PE earlier).

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