Here is what HDFC Sec has to tell about VOL,
Vinati Organics Ltd (VOL) has been operating in the chemical manufacturing industry since 1992 and has successfully implemented technology available to only few in the world. VOL primarily produces IBB (Iso Butyl Benzene) and ATBS (2-Acrylamido 2 Methylpropanesulfonic Acid). Its manufacturing facilities are located at Mahad and Lote Parshuram, Maharashtra. VOL currently has over 300 employees. VOL also has export house status for its ATBS manufacturing facility.
VOL has put up a good performance in H1FY10. In H1FY10, the net sales are up 17.7% at Rs. 111.9 cr y-o-y and the EPS is up 186.2% at Rs. 3.9. While VOL has improved its manufacturing capabilities, there could be some concern about growth in off-take of products given the current global scenario. However, VOL’s products have proved to be recession proof to a certain extent as is evident by the company’s performance in FY09 and H1FY10. The enhanced ATBS capacity which came on stream in May 2009, increased capacity utilization, long-term contracts with MNCs and steady margins add visibility to VOL’s growth. Also, in FY11, VOL’s growth could be fuelled by its backward integration project of IB and the start of production of specialty Alkyl Acrylamides.
At the current market price of Rs. 57, VOL is available at 7.4x and 6.1x its FY10 (E) and FY11 (E) EPS. VOL declared a dividend of Rs. 0.5 in FY09 (adjusted for split). In FY10, the company has declared an interim dividend of Rs. 0.30. One could buy VOL at the current market price and add at declines in the Rs. 47-51 price band for a target of Rs. 66 (7x FY11 (E) earnings) over the next few quarters.
