Vinati Organics Targeted at Rs 1475 by Prabhudas Lilladher

Vinati Organics Sees Revenue Growth in Q4FY26, but Faces Challenges Ahead

Vinati Organics, a leading player in the antioxidants segment, reported revenue of Rs6 billion in Q4FY26, marking a 14% quarter-on-quarter (QoQ) growth but a 7% year-on-year (YoY) decline. The sequential topline growth was primarily driven by volume expansion and gains from the depreciation of the Indian rupee (INR).

However, the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) margin contracted by 130 basis points (bps) QoQ due to higher raw material costs. Despite this, the management has expressed confidence that the increase in input costs will be passed on to customers in the coming period. Vinati Organics has guided a sustainable EBITDAM of 26%-27%.

The antioxidants segment witnessed a 25% volume growth and contributed 12%-14% to the overall revenue. This segment has a peak revenue potential of Rs7 billion. Notably, revenue contribution from new products such as MEHQ (methyl ethyl ketone hydroperoxide) and guaiacol is yet to commence as the plants remain in the stabilization phase, which may take a few more months. We expect contribution from these products to start in the second half of FY27, followed by a gradual ramp-up thereafter.

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Medium-term Growth Visibility

Additionally, plants for upcoming products such as 4MAP, TAA (tert-amyl alcohol), and PTAP are expected to be operationalized in FY27, providing further medium-term growth visibility for the company. The stock is currently trading at 26x FY28E EPS (earnings per share).

Valuation and Recommendation

We value Vinati Organics at 30x FY28E EPS and maintain our 'Accumulate' rating with a target price of Rs1,475.

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