Vinati Organics

(Abhinav Mehrotra) #210

Found a new Butyl Phenol environment clearance project report from Vinati Organics dated June 2017. From the size of the report, it seems comprehensive, I am yet to study it. If I find anything interesting will post my notes here. In the meantime for those interested here is the report:

(django) #211

Does anyone know how to check status of buyback from Vinati Organics?
How many shares were offered for buyback by investors?

(Vivek Mashrani, CFA) #212

The buyback was oversubscribed by 7.5x

(django) #213

Thank you.


(Vivek Mashrani, CFA) #214

Vinati organics buyback done. Acceptance ratio of ~18%. Cheers!!

(jirohit) #215

is this in retail investor category? where can we check details

(Roy) #216

Looks like 18% is the acceptance ratio for small investors with holdings less than 2 lakhs. For general category, the acceptance ratio was 3%

(Vivek Mashrani, CFA) #217

Vinati organics posted excellent set of results in-line with expectations. Most importantly capex of new chemicals looks to be on track since balance sheet reflects CWIP of 43 Cr. Hopefully this will start adding revenue from next 1-2 quarters.

Disclosure: Invested

(Abhinav Mehrotra) #218

Q2FY18 interview with the management of the company.

A few notes on the same:

12% growth in H1 from ATBS as a large competitor in USA has shut down capacity.

A large IBB customer has undergone a 3-month shutdown to debottleneck their capacity. Demand for ibuprofen is growing. We will see an uptick in IBB demand next year.

Margins under pressure due to high RM cost due to ACN. We have a quarterly lag in pricing which we will pass on in Q3.

Margins will be in the range of 28 - 30% this year.

We are at 80% capacity utilization in ATBS.

We are focusing on organic growth. Making a 600 cr investment in PAP. Have our capital tied up for next 3 years. Not looking for acquisitions.

Cash in hand is 100+ cr. Annual cash generation is around 200 cr. CAPEX for next 3 years will be 900 cr.

A lot of new applications for ATBS are being developed. IB will be an interesting chain for us. We are making a lot of products from IB.

(Rohit) #219

Hows the mgmt. Does the management walk the talk

(Chandragupta) #220

And this, just yesterday:
Same paper, different questions. Isn’t this a bit unusual? What’s more, Vinati normally gives interviews after every quarterly results, never in between. Why now?

(Vivek Mashrani, CFA) #221

Looks like reporters are working extra hard for their year-end bonuses to get management talk on their channels. There was interview on Bloombergquint as well. :slight_smile:

(Chemist) #222

(Abhinav Mehrotra) #223

An update on duties from USA for the import of ATBS monomer.

Chemtall, a chemical manufacturer, had appealed to the judges to treat ATBS as an Amide group chemical which would subject it to lower customs duty rates of 3.7% instead of present 6.5%.

The case between Chemtall and US Customs has been on since 2011 and received a final verdict yesterday. The normal duty structure will continue.

A detailed case report of the same:

(Praveen Gramle) #224

Post budget the stock has be continuously correcting any negative news about the company which I missed out!

(Jalal Funds) #225

recent article on moneylife will give a clue

Vinati Organics is an outstanding company with a great record of achieving high margins and generating huge cash flows. But the stock is now quoted at a price-to-earnings ratio (P/E) of 39. Can it justify its high valuation? Only if it is able to pull off huge growth in the coming years which all investors have been waiting for.

According the ET interview, the company expects to add another Rs600 crore to revenues, after the expansion plan. The average net profit margin for past five years has been 16.3% and that gives an EPS of Rs40, approximately. Currently, the company is trading at a P/E multiple of 39x and EPS of 26. Assuming the expansion plans work out, there are no equity dilutions along the way and the P/E multiple remains the same, the stock price should end up in the range of Rs1,600 by FY20-21. That makes a CAGR of 12% return over the coming years. That is the best-case scenario. But a lot can change meanwhile, for the worse, too. In our opinion, it is a risky bet today to invest in such a high P/E multiple company, even if the company is of exceptional quality.

(Praveen Gramle) #226

Yes I buy your point! Thanks for sharing

(abi.varghese) #227

Thank you for sharing …

(Dhruv Saraf) #228

basf is expanding production for ibuprofen at an estimated cost of 1200cr…on the face of It, Vinati stands to benefit from this as it’s capacity expansion is perfectly timed to meet this demand uptick. however, key questions-

  1. companies making ibuprofen can easily move into backward integration to make IBB as well given that demand for ibuprofen is far exceeding supply - in this case, being backwardly integrated would make sure that biggies like BASF aren’t at the mercy of Vinati
    2)EBITDA Margins have historically been at the 25% mark - so why has there been an uptick in the last two years? is it purely crude linked which would mean that there is scope for mean reversion, or is it due to some operational parameters the company has bettered?

views invited

disc - not invested

(mythace) #229

Pricing for basic chemicals is typically on a RM cost + delta model.
For example, the formula is INR (RMC + 20)/kg.
whether the RM cost is 50 or 100, the delta will be 20.

That is why EBITDA will appear to be higher when RM (crude) prices are lower which was the case in 2015-17. More relevant parameter to track will will be contribution/ kg or EBITDA/ kg.

I strongly believe that as crude prices go higher, EBIDTA may shrink in % terms.