I think we should not look at PAP at all. Vinati has been trying to get it right for many years now and have been consistently unsuccessful. Other than management coming and talking about it and spending 20crs in the pilot plant, nothing tangible has happened. So, let’s ignore it for now. If something good comes, even then it will take time to stabilize production and make it commercially available.
what I get to understand is they identified PAP in year 1998(correct me if I am wrong).
Very nicely put about all the products, developments and achievements of Vinati organics in this link. Website looks good to search for other chemical companies as well :
I don’t see any issue in coming 2-3 years as management is very clear that they will enter in to business segment where they can have 20-25 percent plus RoE.
Disc - holding since 60rs and it’s 20 percent of my PF
Thanks for your feedback guys ! Much appreciated !
Links to recent management interviews
Received annual report of Vinati Organics for FY18-19. Below is the link to download:
Here are my notes/comments (mostly in brackets) + snippets from the annual report which I felt were interesting:
Mission: Our aim is to emerge as a globally competitive organization for all our products in terms of cost and quality
In terms of product performance, our major product ATBS contributed to more than 50% of our revenue mix. The exit by one of our key competitors, Lubrizol, further aided the growth of market share. ATBS revenue grew by 69% in FY19 as against FY18 and we also increased our global market share in ATBS from 45% to 65% during FY19
For the second biggest product IBB, we could only achieve a higher single digit growth in volume on account of a client’s capacity shutdown for brownfield expansion. But with expansion in capacity and rising demand for IBB worldwide, we expect a robust double digit volume growth in FY2020
As regard to crude prices, one of the key determinants of our operational cost, we arrived at formula-based pricing contract with our customers. This helped us prevent margin erosions with volatility in crude prices and deliver value to our customers as well
We will increase our ATBS capacity from 26000 tonnes per annum to 40000 tonnes per annum resulting in a capex of INR 110 crores. It is expected to be operational by Q2FY20. Further, our Butyl Phenols project is expected to commission by Q2FY20. With both these projects coming on stream in FY20, we are aiming for doubling our revenues over the next three years.
(I could not find mention of PAP anywhere in the report)
75% revenue derived from customers associated with us for more than 5 years (suggests pricing power and stickiness of products)
5x increase in gross block since 2010
8 new products launched in last 3 years; 4 more to be added in FY20 (businesses in this sector becomes much stronger as it gets bigger in my view - have explained this in recent chemicals sector presentation during Chintan Baithak 2019)
Only manufacturer of TBA, TB Amine, TOA, PTBT, PTBBA, PTBMB in India
Highest purity standard achieved by ATBS product, 99.7% purity standard of IBB product, 99.85% purity standard of IB product, 99.97% purity standard of HP-MTBE product (good combination of low cost moat + high quality products!!)
73% revenue share from export sales - exporting to more than 35 countries
About Indian chemical sector: With an increasing market and purchasing power, the domestic industry is likely to grow at over 15-19% in the coming years. Growing disposable incomes and increasing urbanization are fuelling the end consumption demand for paints, textiles, adhesives and construction which in-turn leads to substantial growth opportunity for the domestic chemical industry.
Was looking at my own posts to learn from my interpretations and when I was reading last line in below post, it surprised me how writing our own thesis and evaluating is important
While I did understood that earnings might surprise us but had never thought that it would almost double in 1-2 years.
BASF is biggest IBB client in the US for Vinati.
Can Experts please translate the impact into numbers?
Chemicals at best are cyclicals. So it’s not surprising after years of run there is news of slowdown. More important is that we get the undercurrent of vinati correct. Lubrizol has exited business and vinati after prudence has decided to go for a huge capex to meet the incremental demand. Infact if the loss of competition and clamping down of chemical companies in China can cover up for loss during the downturn then buying this on dips can give decent returns.
Tracking it closely
Waiting for valuation comfort
BASF is a very diversified company serving a wide range of sectors such as chemicals, pharma, agriculture, plastics, oil & gas etc. Their profit warning is a broad-brush statement reflecting global slowdown and impact of the U.S. - China trade war. Vinati’s IBB is used to manufacture Ibuprofen – which is a medicine, and hence recession proof. There is no threat to Vinati on account of this profit warning.
Interestingly, BASF is a world leader in Ibuprofen and has undertaken expansion of their Ibuprofen facility in Bishop, Texas this year. They also have a brand new Ibuprofen facility under construction in Germany which is expected to go on stream in 2021. So Vinati’s IBB sales to BASF can be expected to go up.
Can we see growth in IOL chemicals too
is anyone planning to attend Vinati’s AGM?
Consistent result from this quarter as well. Similar to last quarter.
The new ATBS capacity was to come on steam starting 1 June. We will need to see how much of this is contributing to the result.
If the contribution is yet to come, then its good result otherwise there are some signs of reduction in prices. Hopefully we will have Vinati Saraf giving the updates on TV soon.