This Article is From Sep 07, 2022

Why Vinati Organics Share Price Is Rising

Here's why shares of the company have been turning around in the past few days.

Why Vinati Organics Share Price Is Rising

Chemical stocks have rallied and turned out to be the best multibagger stocks

The Indian chemical industry is one of the significant contributors to the Indian economy. It contributes roughly 7% of the GDP of the country. India holds a strong position in the trade of chemicals and ranks 14th in export and 8th in imports.

The growth can be attributed to the improved outlook and the fact that covid pandemic has accelerated the shift away from China to other countries.

Post the Covid crash of March 2020, chemical stocks rallied big time and turned out to be the best multibagger stocks.

However, as raw material cost started to increase, chemical stocks came under pressure.

Tailwinds in the form of chemical prices and operating leverage were already played out and Mr Market took note of the high valuations that chemical stocks were trading at.

As things stand now, chemical stocks have again started to see an uptrend. And this time due to different reasons.

Among the lot, a prominent company in the specialty chemical space – Vinati Organics has seen a sharp uptrend.

Shares of Vinati Organics have been in an uptrend in the past few weeks. In fact, the stock zoomed 3% earlier this week to almost hit its 52-week high.

Here's why the company's shares are rising…

#1 Depreciating Rupee 

Indian chemical stocks have seen a reversal in trend on the back of a depreciating rupee.

With the consistent weakening of the Indian rupee against the US dollar, export-oriented chemical stocks have benefited. It is because the exporters receive more rupees for their dollars. 

This rupee depreciation has made chemical stocks attractive from a medium-term perspective as they tend to benefit from export realization.

Due to this, the Indian chemical stocks such as Vinati Organics and Tata Chemicals surged 5-35%. 

Apart from these, here's a list of other Indian chemical stocks and there 3 months rally.


#2 Strong Financials and Capex Plans

In its latest quarterly results, Vinati Organics recorded a 69% YoY jump in revenue for the June 2022 quarter at Rs 16.9 bn.

Its net profit also rose 25% YoY to Rs 1 bn from Rs 809 m in the same quarter last year.

This growth was due to strong growth in volume and price hikes taken in the financial year 2022 due to an increase in input costs.

Apart from this, the management is confident that a niche product portfolio, expansion in its existing capacities, and foray into new products will enable it to keep the revenue momentum strong.

The company, as a part of the expansion, will expand its ATBS chemical manufacturing capacity to 60 bn tons from 40 bn tons since there is a strong demand for it.

The specialty chemical company has also invested Rs 2.8 bn in Veeral Organics, as part of its capex plan. This is to introduce 5-6 niche specialty chemical intermediates including 2,000 m tons of me quinol (MEHQ) & guaiacol and 30,000 m tons of amylene.

These products are used in polymerization inhibitors, flavors, fragrances, pharmaceuticals, and pesticides.

How Vinati Organics shares have performed recently

Shares of Vinati Organics have given stellar returns in the long run, surging 4x in the last five years.

However, the stock is up over 11% in 2022 and 23% in the last year.

Vinati Organics shares touched a 52-week high of Rs 2,323.8 on 26 July 2022 and a 52 -week low of Rs 1,674 on 24 February 2022. 

It currently trades at a PBV (Price to Book Value) of 11.9 times.

Vinati Organics Share Price Performance- YTD

vmff5t8About Vinati Organics

Vinati Organics is a leading manufacturer of specialty chemicals and organic intermediaries. The company has a presence in over 35 counties across the globe.

The product range includes aromatics, industrial monomers, and industrial polymers.

It is the world's largest manufacturer of Isobutyl Benzene (IBB) and 2-Acrylamido 2 Methylpropane Sulfonic Acid (ATBS).

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

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