Buy Vinati Organics Stock For An Upside Of 16% In Coming Market Sessions

Vinati Organics Limited, an Indian manufacturer of chemicals and organic intermediaries, is in the spotlight as the company sees 69% growth in FY22. A recent report of Motilal Oswal gives a buy call to this midcap stock with a potential upside of 16%. Considering the increase in revenue by 69% and gross profit by 33%, the stock has the potential to surge to 16% in the coming market sessions, according to the brokerage report.

Outlook of Vinati Organics Limited– 

Vinati Organics is one of the leading chemical and organic companies with a market capitalization of Rs. 22,983, which offers products to companies across Europe, the US, and Asia. The current price of the stock of Vinati Organics Limited is Rs. 2236, and it is trading near its all-time highs.

Increase in Revenue and Profits this year

Due to an increase in its input cost, the revenue has grown upto 69% in FY22. As per the reports of Motilal Oswal, "Gross profit rose 33% YoY to INR7.5b in FY22, while gross margin contracted by ~13pp due to unprecedented raw material cost inflation and a surge in crude oil prices due to a lower base in FY21."

Returns of Vinati Organics over five years

Over a week, the stock gave a positive return of 0.92%, and it gave a return of 0.36% over a month. For three months, the recorded positive returns were 6.47%, and in the past year, the stock gave a positive upside of 20.99%. The stock gave the most returns in 3 to 5 years, from about 111.6% to 336.88%.

Product View and Valuation of Stock

Different chemicals like VAL and ATBS are doing well for the company; however, IBB has posted a muted performance. "The stock is trading at 38x FY24E EPS and 30x FY24E EV/EBITDA, with return ratios of 20-24%. It has a fixed asset turnover of 2x as of FY22, which will likely improve to 2.1x by FY24E. We value the company at 45x FY24E EPS to arrive at our TP of INR2,593," says Motilal Oswald's latest report.