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Vinati Organics: Lower gross margins impact bottomline growth

News: Vinati Organics reported topline growth of 70% YoY to Rs. 374.1 crore against our estimates of Rs.347.7 crore. We expect the growth should have been driven largely on account of better sales from ATBS segment. There had been increase in crude prices since the start of the year and thus lag in the passing on entire input inflation impacted gross margins for the quarter, which was at 47.6% (-1230bps YoY, +300bps QoQ). Subsequently, OPM was down by 1130bps YoY to 27% leading to EBITDA growth of 20% YoY to | 101 crore against our estimates of Rs.120.6 crore. Subdued operational performance dented bottom-line growth, however higher other income (+868% YoY) negated the impact to some extent. PAT was up by 31% YoY to Rs.81.3 crore against our estimates of Rs.88.9 crore.

Views: The crude prices were up by around ~8% QoQ during Q2FY22 against increase of ~14% QoQ in Q1FY22 and thus we were expecting the company should have taken more price hike this quarter due to lag impact of Q1. This should have led better spread and thereby lifted gross margins for the quarter. However mere 300bps improvement on QoQ was a key surprise given that ATBS contribution was expected to be high and thus, realisation growth along with better product mix should have led further improvement in the GPM. Going ahead, strong growth from anti-oxidant and butyl phenols will likely to aid company performance.