Multi Baggers

VINATI ORGANICS

Vinati Organics Limited (VOL) was established in 1989 and manufactures specialty organic intermediaries and monomers. VOL is the world’s largest manufacturer of Isobutyl Benzene (IBB) and second largest manufacturer of 2-Acrylamido 2-Methylpropane Sulfonic Acid (ATBS). IBB is an organic, neutral, aromatic specialty chemical used as a basic raw material for Ibuprofen, which is an anti-inflammatory analgesic drug used in medical treatment. ATBS is a specialty monomer widely used in oil-field recovery, water treatment, acrylic fiber manufacturing and personal care products. Other high value products are Normal Butylbenzene (NBB), Hexenes, N-Tertiary Butyl Acrylamide (TBA) and Aromatic Solvents.

Deals in Niche and Specialized products

VOL deals in products with technological entry barriers. Over a period of time it has developed exclusive production techniques and thus enjoys economies of scale. The products are next generation products having wide application in various sectors.  

Strong leadership in IBB and ATBS segment

VOL is leader in IBB (Isobutyl Benzene) holding 60.0% share in global market. In ATBS segment, company ranks second in the world with 25.0% market share. It is in the process of increasing the capacity for ATBS which will enhance its position further.

Backward and Forward Integration

VOL is well integrated in backward and forward ways. The dependency on foreign supplier for raw material used in ATBS has been reduced with setting up of IB (Isobutylene) plant. On the forefront, long term supply contracts with the clients provide visibility in production. 

Higher Margins by controlling the Operational Costs

With a planned expenditure of Rs.330 mn, VOL is setting up 5MW power plant for captive consumption. The project will be operational by FY 2013. This will help in lowering down the operational costs by Rs. 70-80 mn thus improving its operating margins in future.

On the Growth Track with introduction of New Products

VOL's new products in the pipeline are following the similar track of being specialized in nature. Introduction of PAP (Para Amino Phenol) is currently in the pilot project stage. Diacetone Acrylamide (DAAM) is another high value monomer, where it is commissioning plant of 1,000 mtpa.

Outlook & Valuation

Vinati Organics Limited (VOL) was established in 1989 and manufactures specialty organic intermediaries and monomers. VOL is the world's largest manufacturer of Isobutyl Benzene (IBB) and second largest manufacturer of 2-Acrylamido 2-Methylpropane Sulfonic Acid (ATBS). IBB is an organic, neutral, aromatic specialty chemical used as a basic raw material for Ibuprofen, which is an anti-inflammatory analgesic drug used in medical treatment. ATBS is a specialty monomer widely used in oil-field recovery, water treatment, acrylic fiber manufacturing and personal care products. Other high value products are Normal Butylbenzene (NBB), Hexenes, N-Tertiary Butyl Acrylamide (TBA) and Aromatic Solvents. The stock is available at an attractive valuation of 8.2x its FY12E earnings of Rs 9.9. We recommend investors to BUY the stock below Rs 80 for initial target price of Rs 99 (10.0x FY12E Earnings).

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