Home / Markets / Stock Markets /  Anand Rathi sees over 39% potential upside on this multibagger chemical stock

Vishnu Chemicals Ltd is a chemical-focused small-cap company with a market capitalization of 1,805 crore. Vishnu Chemicals' stock has risen from 353.35 to 1,511.50 on the NSE in a year, signifying a multibagger return of 328.98 per cent. The stock increased by 5.00 per cent in today's trade, and it has been rising for the previous 5 days, returning 13.65 per cent in that time. It even reached an intraday high of 1,511.5 in today's session.

Focusing on the sturdy growth going ahead, the brokerage firm Anand Rathi has maintained a buy rating on the stock for a target price of INR 2,116 per share, which implies a potential upside of 39.99% from the current market price.

“The company reported strong results in Q4FY22, which were above expectations. The earnings reflect the trickle down effect of the operational initiatives undertaken by the company, including backward integration in the Chromium segment and capacity expansion in the Barium segment. We expect the robust growth momentum to continue as its capital expenditure exercise is complete. It will facilitate expansion in operating margins in the next 2 years. Also, the topline will be benefitted with 50% expansion in the barium plant capacity. Factoring in its sturdy growth going ahead, we value the company at a P/E multiple of 15x its FY24E EPS of INR 141.1 and revise our target price upwards to INR 2,116 per share (earlier TP: INR 1,892 per share). Accordingly, we reiterate our BUY rating on the shares of Vishnu Chemicals Ltd," Anand Rathi has said.

The company completed its major capital expenditure cycle, which included backward integration in its chromium facility and expansion of its barium plant capacity. Both the operations underwent a trial run in Q3FY22 and was commercialized by Q4FY22. The chromium vertical contributes about 85% of the consolidated revenues, while the remaining 15% was attributed to the barium segment, as per the brokerage.

The company reported outstanding results for Q4FY22, with consolidated revenues rising 56 per cent year over year and 12 per cent quarter over quarter to INR 336 Cr. With 1075 Cr in FY22, the firm reached the 1000 Cr revenue milestone for the first time. In FY22, the firm posted its highest ever EBITDA and EBITDA Margin of 161 crore and 15.0 per cent. Profit after tax (PAT) increased by 136% from 34 crore in FY21 to 81 crore in FY22. The company's consolidated debt to equity ratio became 1.3 in FY22, down from 1.7 in FY21. Consolidated return on capital increased to 25% in FY22, up from 13% in FY21, while Consolidated return on equity increased to 29% in FY22.

In Q4FY22, EBITDA climbed by 106 per cent YoY and 16 per cent QoQ to INR 53 Cr, whilst PAT improved by 163 per cent YoY and 16 per cent QoQ to INR 29 Cr, and PAT Margins increased by 345 basis points YoY and 29 basis points QoQ to 8.5 per cent. Owing to a projected rise in demand, the firm is extending its existing capacity in Chromium chemicals by 10,000 TPA, which is scheduled to be finished by H1FY23. With the Barium chemical business, the company is considering a Brownfield expansion to launch a new, higher-margin speciality chemical, with a target date of completion of H1FY24.

Subject to the approval of shareholders, the Board of Directors has recommended a dividend of INR 2 for each equity share with a face value of INR 2 each. The stock is trading higher above the 5 Day, 10 Day, 12 Day, 20 Day, 26 Day, 50 Day, 100 Day, and 200 Day moving averages at today's closing price of 1511.50. The stock reached a 52-week high of 1,799 on March 28, 2022, and a 52-week low of 314.05 on May 17, 2021, implying that it is now trading 15% below its 52-week-high.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

Vipul Das
Vipul Das is a Digital Business Content Producer at Livemint. He previously worked for Goodreturns.in (OneIndia News) and has over 5 years of expertise in the finance and business sector. Stocks, mutual funds, personal finance, tax, and banking are among his specialties, and he is a professional in industry research and business reporting. He received his bachelor's degree from Dr. CV Raman University and also have completed Diploma in Journalism and Mass Communication (DJMC).
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