3 August 2016
1QFY17 Results Update | Sector: Chemical
Vinati Organics
BSE SENSEX
27697
Shares O/s (cr)
52-W H/L Range (Rs)
1/6/12 Month Perf
Market Cap. (INRcr)
Market Cap. (US$ m)
S&P CNX
8544
5.2
564/361
-3/34/-3
2,729
401
CMP: INR529
YEAR
March
FY15
FY16
FY17E
SALES
A.PAT
(INRCr) (INRCr)
759
578
707
116
99
126
TP: INR595 (+12%)
A.EPS
(INR)
22.4
19.2
24.4
A.EPS
Gr.(%)
29%
-14%
27%
PE
(X)
24
28
22
P/BV
(X)
6.3
5.0
4.3
EV/
NEUTRAL
DIV. YLD
(%)
4.4%
0.8%
0.9%
ROCE
(%)
38%
28%
30%
EBITDA(X)
2.1
15.3
12.3
Results Overview- Above estimate; Increased mix of ATBS and new products lead to uptick in margins
For Q1 FY17, VOL's revenue was INR 167.1 cr,+8.1% YoY and +8.2% QoQ; EBITDA was INR 59.6 cr, +34.2% YoY
and +17.4% QoQ; and PAT was INR 35.8 cr, +15.2% YoY and -9.0% QoQ.
Revenues grew 8.1% YoY led by strong ATBS sales (+18.0% YoY) and 2 new product launches (contributed ~10%).
EBITDA grew +34.2% YoY with +751bps YoY margin expansion to 37.1%, on account of a favourable product mix
(ATBS and new launches). The company is expected to launch new products during FY17, the full effect of which will
be realised in FY18E. Gross margins have improved 769bp to 57.2% as the contribution of ATBS segment has
increased in percentage terms (49% vs 46% YoY) and the company has been able to maintain the profits per unit
terms.
Going forward, we expect introduction of new products to be the key volume driver.
1QFY16
154.6
110.2
44.4
1.1
2.5
4.6
8.7
47.3
16.2
0.0
31.0
29.6%
34%
4QFY16
154.4
103.7
50.7
2.0
1.2
4.7
0.0
46.8
7.6
0.0
39.3
34.0%
16%
1QFY17
167.1
107.5
59.6
1.3
1.4
5.3
0.0
54.1
18.4
0.0
35.8
37.1%
34%
15.2% -9.0%
15%
16%
-43%
16%
19%
12%
yoy
8.1%
-2%
qoq
8.2%
4%
FY15 FY16
yoy
VO‐LHS
Rel to Sensex(%) RHS
INRCr
Total Income
Expenditure
EBITDA
Other Income
Interest
Depreciation
E/O Gain
PBT
Tax
780.9 598.4 -23%
579.9 424.2 -27%
200.9 174.2 -13%
0.0
9.8
17.7
0.0
57.7
0.0
115.8
33%
6.2
7.9 -20%
18.5
0.0
55.0
0.0
99.1 -14%
36%
-5%
5%
700
600
500
400
300
200
100
34.2% 17.4%
173.5 154.0 -11%
15
10
5
0
‐5
‐10
‐15
‐20
5
1
‐
g
u
A
5
1
‐
v
o
N
6
1
‐
b
e
F
6
1
‐
y
a
M
6
1
‐
g
u
A
P\L of Associates
Adj. PAT
EBITDA (%)
Tax rate (%)
26.5% 30.1%
Valuation and view
VOL remains a high quality chemical play based on (1) New product launches, (2) Traction in ATBS demand, (3)
High pricing power, given VOL's niche position and product selection, and (4) Strong margins coupled with a net
debt-free balance sheet
We expect the company to grow its profits at 24% CAGR over FY16-18E.
Vinati Organics with its superior return ratios is available at 17.9x FY18E EPS. We maintain our target price of INR
595 (20x FY18E EPS) providing for an upside of ~12%.
Dharmesh Kant (Dharmesh.Kant@motilaloswal.com); Tel: +91 22 30102470
Investors are advised to refer through important disclosures made at the last page of the Research Report.
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