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Capacity ramp-up and VOPL scale-up to drive earnings Operating performance in line

* Vinati Organics (VO) reported a revenue growth of 28% YoY; however, its EBITDA margin contracted 500bp YoY to 24.5% due to volatility in key raw material prices. Consequently, EBITDA inched up 7% YoY to INR1.7b.

* Looking ahead, 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 in Oct'26. Additionally, the BP (Butyl Phenol) segment and the Isobutyl Benzene (IBB) segment are expected to witness a gradual improvement in demand.

* We broadly maintain our earnings estimates for FY27/FY28 and value VO at 28x FY28E EPS to arrive at our TP of INR1,550. Reiterate BUY.

Margins under pressure due to raw material volatility

* Revenue came in at INR7b (est. of INR5.8b), up 28% YoY and 15% QoQ.

* Gross margin was 46% (vs. 52.3% in 1QFY26 and 52.5% in 4QFY26).

* EBITDA margin came in at 24.5% (-500bp YoY, -370bp QoQ).

* EBITDA stood at ~INR1.7b (est. of INR1.6b) – +7% YoY, flat QoQ.

* Adjusted PAT stood at INR1.1b (in line) – up 4% YoY, but down 12% QoQ.

Valuation and view

* Vinati Organics 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), scheduled for Oct'26.

* 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 catering to diverse end-user industries.

* We broadly maintain our earnings estimates for FY27/FY28 and expect a CAGR of 18%/15%/13% in revenue/EBITDA/PAT over FY26-28. The stock trades at ~23.8x FY28E EPS of INR54.9 and ~15.4x FY28E EV/EBITDA. We value the stock at 28x FY28E EPS to arrive at our TP of INR1,550. Reiterate BUY

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