Vinati Organics sees ATBS recovery and Veeral revenue catalysts ahead

Investment View and Report Summary

In its July 30, 2026 result update, ICICI Securities retained its BUY view on Vinati Organics, describing Q1 FY27 as a good beginning after a weak FY26. The broker has set a target price of Rs 1,550, compared with the current market price of Rs 1,300.

Vinati Organics is a specialty chemicals and organic intermediates manufacturer with global leadership in ATBS and isobutyl benzene (IBB). Its product portfolio also includes IB, butyl phenols and antioxidants. The company operates manufacturing facilities at Mahad and Lote, while Veeral Organics is its specialty chemicals subsidiary.

Q1 FY27 Financial Performance

Q1 FY27 revenue was Rs 696 crore, up 28 per cent year-on-year, supported by volume growth in antioxidants and other products, the pass-through of higher raw-material costs to customers and rupee depreciation. Management noted that exports account for 55 per cent of revenue.

Profitability lagged revenue growth as gross margin declined by about 640 basis points year-on-year to 46 per cent. EBITDA increased 7 per cent year-on-year to Rs 170.5 crore, while EBITDA margin declined by about 500 basis points to 24.5 per cent. PAT rose 4 per cent year-on-year to Rs 109 crore.

The margin pressure reflected a sharp increase in raw-material costs amid geopolitical disruptions, only part of which Vinati Organics was able to pass on to customers.

FY27 Guidance and Operating Outlook

Management reiterated its FY27 guidance for an EBITDA margin of 26-27 per cent, supported by a better product mix comprising ATBS, IBB, antioxidants and other differentiated specialty products. It also guided for at least 15 per cent volume growth.

• ATBS demand is expected to begin recovering gradually from October, supporting utilisation of expanded high-quality ATBS capacity.
• ATBS capacity has increased from 30,000 MTPA to 50,000 MTPA.
• Antioxidant demand remains healthy, with recent improvement in realisations supporting profitability.
• The company is investing in downstream and forward-integrated products including butyl phenols, MEHQ, 4MAP and other antioxidants.

Veeral Organics: Key Growth Catalyst

Veeral Organics is viewed by ICICI Securities as a key H2 FY27 and longer-term growth trigger. Engineering and process optimisation at the plant is expected to be completed by December 2026, with meaningful revenue contribution expected from January 2027.

Management expects Veeral Organics to contribute about Rs 150 crore of revenue in FY27. At 70-80 per cent utilisation, the business has potential annual revenue of about Rs 400-500 crore.

The business will manufacture products including antioxidants, MEHQ, guaiacol and anisole. Management said anisole will be manufactured from phenol, with sourcing between imports and domestic production determined by economics. It does not expect anisole procurement to materially affect revenue growth or EBITDA margin.

Capital Expenditure and Return Outlook

Vinati Organics has guided FY27 capital expenditure of Rs 200-250 crore, in addition to capital expenditure at Veeral Organics. Management expects return on capital employed to improve from about 15-16 per cent currently to around 20 per cent over the next two to three years, as recently commissioned capacities ramp up and utilisation rises.

Broker Estimates and Valuation

ICICI Securities' target price of Rs 1,550 is based on 20 times EV/EBITDA applied to FY28E EBITDA of Rs 770.3 crore.

Key Risks

• Lower-than-expected revenue growth from new products.
• Continued volatility in raw-material prices.