Vinati Organics Limited — Q4 FY24 earnings call

Call held 17 May 2024

Management summary

Vinati Organics reported a strong sequential recovery in Q4 FY24, signaling the end of the global destocking cycle that hampered FY24 annual performance. While full-year profits and revenues were down compared to FY23, the company is seeing robust demand recovery in its core ATBS segment and high utilization in Butyl Phenols. Management is pivoting towards growth with a significant capex plan and a target of 20% revenue CAGR over the next three years.

Highlights

  • Q4 FY24 Revenue reached ₹560 crores, a sequential increase of 23% from Q3 FY24.

  • EBITDA for the quarter stood at ₹160 crores, up 29% QoQ, with PAT at ₹104 crores, up 30% QoQ.

  • FY24 annual revenue declined 9% YoY to ₹1,930 crores, while PAT fell 23% to ₹323 crores due to earlier destocking.

  • ATBS global market share remains stable at 60-65%; sales have normalized following the end of the destocking cycle.

  • Butyl phenols capacity utilization reached nearly 100% in Q4, contributing ₹300 crores to FY24 revenue.

  • Management guided for a 20% revenue CAGR over the next 3 years, driven by new products and capacity expansions.

  • Total capex for FY25 is planned at ₹550 crores, including ATBS expansion and VOPL subsidiary projects.

Concerns

  • Chinese Competition in Antioxidants

Key financials

2 periods

Headline

  • Total Income
    ₹560 Cr
    QoQ +23%
  • EBITDA
    ₹160 Cr
    QoQ +29%
  • PAT
    ₹104 Cr
    QoQ +30%

FY24

  • Revenue
    ₹1,930 Cr
    YoY -9%
  • EBITDA
    ₹509 Cr
    YoY -18%
  • PAT
    ₹323 Cr
    YoY -23%

What they filed

Q1 FY27: revenue up 28.4%, net profit up 4.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue553 522 648 542 550 −1%531 +2%604 −7%696 +28%
EBITDA134 142 180 160 167 +25%157 +11%170 −6%170 +6%
Net profit104 94 123 104 115 +11%101 +7%124 +1%109 +5%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentRevenueCapacity Utilization
ATBS——
Butyl Phenols₹300 Cr100%
Antioxidants₹130 Cr25%

Guidance & targets

Revenue

  • Revenue CAGR Revenue · next 3 years · High confidence 20%
    We expect to have maintain a revenue CAGR of approximately 20% over the next 3 years mainly driven by the new products as well as some of our existing products.

    — Vinati Saraf Mutreja, MD & CEO

  • VOPL Revenue Revenue · FY25 · Medium confidence ₹280-300 crores

    From ₹130 crores today

    See, one can expect sales to double, at least double. I mean, we did INR130 crores. I think we should do close to INR280 crores, INR300 crores this financial year.

    — Vinati Saraf Mutreja, MD & CEO

Margin

  • EBITDA Margin Margin · FY25 · Medium confidence 26%
    I expect to maintain or to see EBITDA margins in the range of 26% because this is how the product mix is going to stay going forward.

    — Vinati Saraf Mutreja, MD & CEO

Capex

  • Total Capex Capex · FY25 · High confidence ₹550 crores
    The overall capex in the coming financial year should be around INR550 crores including the subsidiary.

    — Vinati Saraf Mutreja, MD & CEO

Capacity

  • ATBS Expansion Completion Capacity · H2 FY25 · Medium confidence December or January
    The plant I do not think will start before December or January. That is what realistically it is looking like.

    — Vinati Saraf Mutreja, MD & CEO

Risks & concerns

  • Chinese Competition in Antioxidants

    high

    Management noted significant price erosion in the AO segment due to Chinese supply and slow global plastic markets.

    Both acknowledged

  • Equipment Delivery Delays

    medium

    Delivery constraints for equipment ordered from Europe are delaying the ATBS expansion commissioning to late FY25.

    Management acknowledged

  • Raw Material Price Volatility

    medium

    Revenue potential for products like Butyl Phenol is sensitive to fluctuations in input raw material prices like Isobutyl Benzene (IB).

    Management acknowledged

Areas of evasion (2)

  • Specific product-wise margin breakups
  • Detailed volume vs realization split for IBB

Q&A highlights

2 direct, 1 evasive
ATBS Capacity Utilization and Expansion Direct
Today, we are seeing good demand for the higher purity ATBS... we are close to 100% utilization. Now, after the new line comes in place, again, it will take at least three years for it to achieve that full capacity utilization.

Confirms that the core ATBS business is back to full capacity, making the upcoming expansion critical for further growth.

Asked by Abhijit Akella, Kotak Securities

Antioxidant Pricing and Chinese Competition Direct
In antioxidants, we have seen a price erosion in the last year or so. There is a lot of product coming in from China and places like that. Again, because the market is slow, as the market recovers, maybe the price may also improve.

Highlights the primary competitive risk in the specialty chemicals sector—Chinese dumping and its impact on realization.

Asked by Archit Joshi, B&K Securities

Product-wise Revenue Breakdowns Evasive
I'm not going to share specific product-wise numbers or breakups or margins.

Management is becoming more guarded about granular product-level profitability, which can make precise modeling difficult for analysts.

Asked by Abhijit Akella, Kotak Securities

2 min read 5 chapters

Detailed narrative

ATBS Normalization and Expansion

The ATBS segment, which accounts for 32% of total revenue, has successfully emerged from a global destocking phase. Management confirmed that existing capacity is currently running at nearly 100% utilization, particularly for high-purity grades. To meet future demand, an expansion is underway, though commissioning has been pushed to December 2024 or January 2025 due to equipment delivery delays from Europe. Once the new line is operational, it is expected to take approximately three years to reach full capacity utilization.

Antioxidant Business Facing Headwinds

The antioxidant (AO) business contributed ₹130 crores in FY24, operating at a low 25% capacity utilization. The segment is currently facing significant price erosion and competitive pressure from Chinese manufacturers. Despite these challenges, management expects to scale up AO sales significantly in FY25, targeting at least 50% utilization as the global plastics market recovers. They remain confident in their long-term competitive edge due to their doubly backward-integrated manufacturing process.

VOPL Subsidiary and New Product Pipeline

Vinati Organics is investing heavily in its 100% owned subsidiary, VOPL, with a total capex of approximately ₹500 crores. The subsidiary recently commissioned an MEHQ Guaiacol plant in March and expects to commission anisole, 4-methoxyacetophenone, and isoamylene derivatives in H2 FY25. Revenue from VOPL is projected to double from ₹130 crores to nearly ₹300 crores in the coming fiscal year, with a peak revenue potential of ₹500 crores achievable within three years.

Butyl Phenols and Anti-Dumping Benefits

The Butyl Phenols segment was a key contributor in FY24, generating approximately ₹300 crores in revenue. Utilization improved from 65-70% for the full year to nearly 100% in the final quarter. Management noted that the imposition of anti-dumping duties has improved the pricing environment for butyl phenols. While revenue potential fluctuates with raw material prices, the segment is expected to continue delivering growth in FY25.

Strategic Shift to Solar Power

As part of its operational efficiency and sustainability goals, the company has commissioned 33 megawatts of solar power capacity. This initiative is aimed at reducing dependence on conventional power sources and lowering overall energy costs. Management highlighted that these solar initiatives are already contributing to margin improvements by reducing power and fuel expenses.

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