Fundamentals

VINATI ORGANICS 

Ticker : 524200
BUY: Rs 980.20
Target: Rs 1070 

Vinati Organics is one among the best Indian specialty chemicals companies and is rapidly gaining scale by building large capacities for new products. It is also the world's largest producer of Isobutylbenzene and second largest manufacturer of acrylamido 2 methyl propane sulfonic acid. The company reported modest numbers in Q4FY18 with revenue, EBITDA and PAT growing at 9 per cent,4 per cent and 27 per cent YoY, respectively. Vinati announced capacity expansion from 16,000 to 20,000 on ATBS and has given expectations of ~20 per cent volume growth annually for ATBS, over the next two years. Additionally, increase in raw material prices due to China capacity shutdowns has impacted gross margins (down ~90 bps YoY) for this quarter as well. We recommend BUY on the stock owing to market share gain and strong expansion plan. 

PRAJ INDUSTRIES 

Ticker : 522205
BUY: Rs 102.10
Target: Rs 117 

Praj Industries offers solutions for beverage alcohol and bio-ethanol plant, brewery, water and wastewater treatment plant, critical process equipment and systems and bio-products. In Q4FY18, the company reported 17.7 per cent YoY growth in its net profit to Rs 26.81 crore. Praj is one of the companies in the world which successfully developed and demonstrated second generation ethanol technology using agri-residue. Notably, the new bio-fuels policy recently unveiled by the government proposes funding gap of Rs 5,000 crore for 2G bio-refineries, to be deployed over six years. Currently, the public sector oil marketing companies are in the process of setting up twelve 2G bio-refineries with an investment of around Rs 10,000 crore, which augurs well for the Praj Industries.