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Multibagger chemical stock turns 1 lakh to 23 Cr after 1 bonus share: Buy?

Vinati Organics is one of the multibagger stocks that Indian stock market observers have seen, but outside that, the firm has only declared bonus shares once since its listing, which has led to lakhpati investors becoming crorepati. Let's find out how. (istockphoto)Premium
Vinati Organics is one of the multibagger stocks that Indian stock market observers have seen, but outside that, the firm has only declared bonus shares once since its listing, which has led to lakhpati investors becoming crorepati. Let's find out how. (istockphoto)

  • Vinati Organics Ltd, one of the large-cap companies, operates in the specialty chemical industry and has a market valuation of 21,435.20 Cr

Vinati Organics Ltd, one of the large-cap companies, operates in the specialty chemical industry and has a market valuation of 21,435.20 Cr. The firm is a top producer of organic and specialised chemical intermediaries with a global market presence covering more than 35 countries. It provides a broad variety of products to some of the major industrial and chemical enterprises in the US, Europe, and Asia. Specialty Aromatics, Specialty Monomers, Butyl Phenols, miscellaneous specialty products, and Polymer are among the company's product categories. Vinati Organics is one of the multibagger stocks that Indian stock market observers have seen, but outside that, the firm has only declared bonus shares once since its listing, which has led to lakhpati investors becoming crorepati. Let's find out how.

Share price history of Vinati Organics

On the BSE, the shares of Vinati Organics closed on Friday at 2085.50 apiece, up by 3.76% from the previous close of 2009.85. On Friday the stock recorded a total volume of 4,569 shares compared to the 20-Day average volume of 7,242 shares. The stock price has risen from 1.33 as of 14th July 1995 to the current market price which logs in a whopping multibagger return of 156,659.40% in the last 27 years. On the BSE, the stock had touched a 52-week-high of 2,372.95 on (12/09/2022) and a 52-week-low of 1,675.00 on (24/02/2022), indicating that at the current market price the stock is trading 12.11% below the high and 24.50% above the low.

As per the data available on BSE, the company announced 1 bonus share in a 1:2 ratio on 22 November 2007. As in the initial stage, the stock price was 1.33, if an individual had invested 1 lakh at that time then it would have given him a shareholding of 75,187 shares. However, after the bonus share announcement of the company the total share count would have climbed to 1,12,780 shares. As a result, at the current market price, the total shareholding—or 1,12,780 shares multiplied by 2085.50—would have earned you an investment return of 23.52 Cr. This explains how, if company activities like bonus shares are taken into consideration, a long-term investment might completely transform your initial investment.

Should you buy the shares of Vinati Organics?

The research analysts of the broking firm Sharekhan have recently said that “Vinati Organics’ capex plan to expand ATBS capacity, investment strategy to foray into niche products (MEHQ, Guaiacol and Iso Amylene) and proposed merger of VAPL (benefit of forward integration in antioxidants) with Vinati improves visibility on sustained high earnings growth (expect a 32% PAT CAGR over FY22-25E). A 14% fall in the stock price from 52-week high provides good entry for the investors considering sustained long-term high double-digit earnings growth potential."

They further added in their research note that “Vinati Organics’ capex plan of ~Rs. 300 crore to augment ATBS capacity by 50% to 60 ktpa (expected by December 2023) and Rs. 280 crore for entry into new products (MEHQ & Guaiacol and Iso Amylene; expected by Sep-23) and company’s track-record of being the top player (as in the case of ATBS/IBB) in its products gives us confidence on longevity to sustained high revenue/ earnings growth. Veeral Additives Private Ltd’s (VAPL) merger (expected to get completed by end-FY23) with Vinati would provide synergies in terms of forward integration of Butyl Phenol to antioxidants, which would help tap huge antioxidant market opportunity of Rs. 10,000 crore. Merger of VAL is key catalyst. Strong balance would support capex for capacity expansion and R&D pipeline of 10-12 products would aid product development. We introduce our FY25 earnings estimate and expect 32% PAT CAGR over FY22-25E along with strong RoE/RoCE of 25%/33%."

They claimed that “Vinati Organics’ dominant global market share in ATBS/IBB segments, niche product portfolio and massive export opportunity in the specialty chemical sector would drive sustained long-term high double-digit earnings growth. Likely higher ATBS margin and ramp-up of Butyl Phenol would drive strong 32% PAT CAGR over FY2022-FY2025E along with solid RoE/RoCE of 25%/33%. Potential merger of Veeral Additives (VAPL) with Vinati remains a key catalyst for the stock in FY23. Hence, we maintain Buy on Vinati Organics with an unchanged PT of Rs. 2,500. The stock trades at 31.5x its FY2024E EPS and 26.4x its FY2025E EPS."

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

 

ABOUT THE AUTHOR

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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