Book Partial Profits - Vinati Organics

Vinati Organics was recommended by us in our low price column of DSIJ issue dated October 26,2008. The basis for our recommendation was company's strong earning visibility, good product line and capex by the company to ramp up its production facility. The scrip was recommended at Rs 62. Post our recommendation it has moved to touch peak of Rs 82.95 giving a return of 34 per cent. The out-performance of the scrip was on the backdrop of the under-performance of the broader market index, Sensex. In the same period Sensex dropped by six per cent. Currently it is trading at Rs 68.90 giving return of 11 per cent from our recommended price. Result for the second quarter is on 27 October and the company is expected to post good topline and bottomline. Topline may post good numbers as rupee has depreciated in the last quarter and the company earns 58 per cent of its revenue from the export market. Net Margin is likely to improve as company's Lote unit has been recognized as100 per cent EOU (Export Oriented Units) and these units carry tax breaks.

This has come into effect from July 28,2008 and the effect will reflect in this quarter results. This will help the counter to remain in momentum. Going by the current market situation, where lot of uncertainty prevails, we recommend our readers to make use of this momentum and book partial profits and hold rest for long term to achieve our target of Rs 100. Third quarter results is also likely to post good results once its capacity expansion plan of ATBS comes into effect from October, 2008.