Vinati Organics – ATBS Demand Outlook Robust; Realisations Firm: Motilal Oswal

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Oil drilling activities remain vigorous globally as the countries move away from their dependence on Russian oil and gas. Average global rig counts have risen 10% since the Russia-Ukraine conflict started in March 2022.

Inline with the above, Vinati Organics Ltd.’s management outlook for ATBS remains robust and it has announced a 50% capacity expansion to 60 thousand tonnes per annum (from 40 ktpa), which is likely to come online in H2 FY24. ATBS primarily caters to the oil and gas industry.

Exports form a major part of Vinati Organics’ overall revenue and according to our database, volumes remain steady YoY. Implied blended realisations in $/kg have also been firm and move in line with the Brent prices over a longer period of time, according to our research.

We expect return on equity to improve to 26% for FY24 from 21% in FY22. The stock is trading at 32 times FY24E earnings per share and 25 times FY24E enterprise value/Ebitda.

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