In FY12 and FY13, co plans to invest . 150 crore
The Mumbai-based specialty chemicals maker Vinati Organics is investing heavily in expanding capacities and adding new products, which will drive its profitability growth in the next two-three years. Although, the scrip has fallen to its 52-week low, it has outperformed the BSE Sensex over the past one year. The economic weakness in the western countries is leading to an increase in outsourcing activity in manufacturing of specialty chemicals. Vinati Organics derives 89% of its revenues through US dollarlinked contracts at a time when the rupee has depreciated over 20% in the past five months. This, in turn, will prove to be positive factors for the company’s bottomline in the coming quarters.
Vinati Organics has enjoyed a high-speed growth in the past few years. Its net profit grew at a cumulative annualised growth rate (CAGR) of 93% between FY06 and FY11, while the revenues grew at 41%. In the first half of FY12, however, the company faced stagnancy due to a variety of factors. Sales of its IBB were low due to competition, isobutylene plant was running at sub-optimal capacity and expiry of sops increased tax burden. The things are, however, back to normal now.
The company has been investing heavily of late. Between FY09 and FY11, it doubled its gross block to . 149 crore, which will again double by end FY13. However, its debt-equity ratio has declined steadily to 0.56 at end September 2011, thanks to high profitability and healthy cash generation. Vinati Organics is the world’s largest producer of IBB — a chemical, which is the raw material of widely-consumed pharma drug ibuprofen. It is also the largest producer of ATBS — a monomer used in oil extraction industry. Thanks to backward integration, it has also built India’s biggest isobutylene plant. The company is now adding more specialty chemicals to its portfolio, catering to industries such as pharma, agrochemicals, oil & gas, among others.
In FY12 and FY13, it plans to invest . 150 crore, which will double ATBS capacity to 24,000 tonne apart from adding products such as Diacetone Acrylamide (DAAM), High Purity Methyl Tert Butyl Ether (HP MTBE) and Di-Ethyl Aniline (DEA). Most of these additional plants will commence operations by July 2012. Due to the weakness in the overall market, the scrip is currently trading at a price-to-earnings multiple (P/E) of 6. Its beta — a measure of volatility — to Sensex is around 0.36 for the past 12 months, indicating a stable stock.
Vinati Organics has enjoyed a high-speed growth in the past few years. Its net profit grew at a cumulative annualised growth rate (CAGR) of 93% between FY06 and FY11, while the revenues grew at 41%. In the first half of FY12, however, the company faced stagnancy due to a variety of factors. Sales of its IBB were low due to competition, isobutylene plant was running at sub-optimal capacity and expiry of sops increased tax burden. The things are, however, back to normal now.
The company has been investing heavily of late. Between FY09 and FY11, it doubled its gross block to . 149 crore, which will again double by end FY13. However, its debt-equity ratio has declined steadily to 0.56 at end September 2011, thanks to high profitability and healthy cash generation. Vinati Organics is the world’s largest producer of IBB — a chemical, which is the raw material of widely-consumed pharma drug ibuprofen. It is also the largest producer of ATBS — a monomer used in oil extraction industry. Thanks to backward integration, it has also built India’s biggest isobutylene plant. The company is now adding more specialty chemicals to its portfolio, catering to industries such as pharma, agrochemicals, oil & gas, among others.
In FY12 and FY13, it plans to invest . 150 crore, which will double ATBS capacity to 24,000 tonne apart from adding products such as Diacetone Acrylamide (DAAM), High Purity Methyl Tert Butyl Ether (HP MTBE) and Di-Ethyl Aniline (DEA). Most of these additional plants will commence operations by July 2012. Due to the weakness in the overall market, the scrip is currently trading at a price-to-earnings multiple (P/E) of 6. Its beta — a measure of volatility — to Sensex is around 0.36 for the past 12 months, indicating a stable stock.
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