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Gross margin expansion drives earnings

Earnings above our estimate

• Vinati Organics (VO) reported a strong operated performance in 1QFY26, as EBITDA surged 33% YoY to INR1.7b. Gross margin expanded 710bp to 52%, while EBITDAM expanded 670bp YoY to 30.6%. PAT grew 31% YoY to INR1.1b (our est. INR940m).
• For FY26, VO is targeting revenue growth across ATBS, BP, and AO segments, supported by favorable demand trends and capacity additions. The company has guided for a 20% CAGR in revenue over the next three years and aims for EBITDAM of 26-27% in FY26.
• We largely maintain our earnings estimates for FY26/FY27. We value VO at 37x FY27E EPS to arrive at a TP of INR2,180. We reiterate our BUY rating on the stock.

Strong operating performance despite muted sales

• In 1QFY26, revenue rose 3% YoY to INR5.4b (est. of INR5.6b).
• Gross margins expanded by 710bp YoY to 52%, while EBITDAM came in at 30.6% (+670bp YoY). Other expense as a percentage of sales stood at 13.9% vs. 15% in 1QFY25.
• EBITDA grew 33% YoY to INR1.7b (est. of INR1.4b). ? Adjusted PAT increased by 31% YoY to INR1.1b (est. of INR940m).

Valuation and view

• VOPL has commissioned a plant for MEHQ and Guaiacol, along with other products (Anisole, 4-MAP, Iso Amylene, etc.), to be commercialized in FY26. We expect them to be the key growth drivers for VO going forward.
• VO is now producing the largest amount of antioxidants (AOs) in India. While Chinese supply poses a potential threat, the long-term outlook for the segment remains positive on the back of a novel antioxidant for lubricant additives, further strengthening the portfolio.
• We expect operating margins to stay healthy, supported by leadership in ATBS, the scale-up of AOs, upcoming product launches, market expansion and product enhancements.
• We broadly maintain our FY26/FY27 estimates and expect a CAGR of 20%/25%/25% in revenue/EBITDA/PAT over FY26-27. The stock trades at ~27x FY27E EPS of INR62.2 and ~19x FY27E EV/EBITDA. We value the stock at 35x FY27E EPS to arrive at a TP of INR2,180. Reiterate BUY.

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