Vinati Organics Ltd CMP Rs 150: Good for medium-term ( Recommended to SOKHI PAID Members at 112 levels )

Vinati Organics Ltd. (VOL) is a 20-year old Raigad, Maharashtra, based company established in 1989, which has jointly promoted by the Maharashtra Petrochemicals Corporation (MPCL) and Vinati Enterprises. It manufactures speciality organic intermediates and monomers. Mr. Vinod Saraf is the chairman & managing director of the company while recently Mr. Girish Dave has been nominated as its non-executive chairman.

Latest Quarterly Results: For Q4FY09, while sales increased by 8.93% to Rs.45.26 cr. as against Rs.41.55 cr. in Q4FY08, net profit pole vaulted 174.10% to Rs.12.17 cr. from Rs.4.44 cr. in Q4FY08 and it netted a quarterly EPS of Rs.12.33 against Rs.4.5 in Q4FY08.

Share Profile: VOL’s share with a face value of Rs.10 are listed and traded on the BSE under the B group. Its share price touched a 52-week high/low of Rs.122/50.75. At its current market price of Rs.135, the company has a market capitalisation of Rs.127 cr.

Dividends: The company has been paying dividends for the last five years as shown below:
FY09 - 25%, FY08 - 20%, FY07 - 12%, FY06 – 10%, FY05 – 10%.

Shareholding Pattern: The promoter holding in the company is 72.79% while the balance 27.81% is held by non-corporate promoters, institutions and the investing Public.

Prospects: VOL has mastered the difficult technology to produce these speciality monomers while adhering to strict quality specifications. By building customer relationships, it has successfully developed a significant market presence and expects a sizeable growth for IBB in USA in coming ears.

Since the manufacturing costs are significantly lower in India and the company has employed efficient manufacturing practices, it was able to compete with producers worldwide.

Conclusion: VOL is the world's largest manufacturer of IBB. Moreover, the technology to manufacture products such as ATBS/Na-ATBS & TBA is rare and there are only two other big producers of these monomers in the world. Since supplies of these products are limited, customers are always looking out for a new source of supply.

At its current market price of Rs.150, its share discounts FY09 earnings around 6 times as against the industry average P/E multiple of over 13. In view of its encouraging performance, unique products and bright prospects going ahead, the VOL share is a good pick with a medium-to-long-term investment horizon.

This Scrips was recommended to SOKHI PAID Members at 112-115 levels.