Buy Vinati Organics Ltd For Target Rs.1,270 by Motilal Oswal Financial Services Ltd
ATBS-led growth outlook remains intact despite near-term margin pressure
Operating performance below our estimate
* Vinati Organics (VO) reported a weak operating performance in 2QFY27, with EBITDA declining 25% YoY to INR1.2b and EBITDA margin contracting sharply to 18.5% from 30.4% in 2QFY26, mainly due to volatility in raw material prices.
* Margins are expected to remain under pressure in the near term due to the volatility of raw material prices. However, revenue growth is likely to be driven by the ATBS segment, fueled by the ramp-up of Phase I capacity and the commissioning of the Phase II expansion. Additionally, the BP (Butyl Phenol) segment and the Isobutyl Benzene (IBB) segment are expected to witness a gradual improvement in demand.
* On account of the weaker-than-expected performance, we cut our FY27/FY28 earnings estimates by 14%/7% and value VO at 25x FY28E EPS to arrive at our TP of INR1,270. Reiterate BUY.
Margins remain under pressure due to raw material volatility
* Revenue came in at INR6.8b (est. of INR6.8b) up 24% YoY, down 2% QoQ
* Gross margin stood at 42.2% (vs. 55.8% in 2QFY26 and 46% in 1QFY27)
* VO’s EBITDAM came in at 18.5% (vs. 30.4% in 2QFY26 and 24.5% in 1QFY27)
* EBITDA stood at ~INR1.2b (est. of INR1.8b), down 25% YoY, down 26% QoQ
* Adjusted PAT stood at INR784m (est. of INR1.1b) down 32% YoY, down 28% QoQ
* In 1HFY27, VO’s revenue grew 26% YoY to INR13.8b, while EBITDA/Adj. PAT declined 9%/15% YoY to INR3b/INR1.9b
* CFO stood at INR1.7b in sep’26 vs. INR3.6b on sep’25
Valuation and view
* VO is well-positioned to capitalize on the anticipated demand recovery in the ATBS segment through the ramp-up of its Phase I (10,000 MTPA) capacity expansion and the commercialization of Phase II (an additional 10,000 MTPA).
* Further, we expect Veeral VOPL to make a meaningful contribution from 2HFY27, driven by the ramp-up of newly commercialized products, including Anisole, 4-MAP, TAA, and PTA, which cater to diverse end-user industries.
* On account of the weaker-than-expected performance, we cut our FY27/FY28 earnings estimates by 14%/7% and value VO at 25x FY28E EPS to arrive at our TP of INR1,270. Reiterate BUY.
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