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Vinati Organics Small Cap Recommendations

November 3, 2007

Here is a few small cap recommendations being made on the fundamentals as well as growth prospects of companies with good management and which are quoting at decent PE multiples.

Vinati Organics:
Vinati Organics Ltd (VOL) has been operating in the chemical manufacturing industry since 1992 and has successfully implemented technology available to only few in the world. VOL primarily produces IBB (Iso Butyl Benzene) and ATBS (2-Acrylamido 2 Methylpropanesulfonic Acid). Its manufacturing facilities are located at Mahad and Lote Parshuram, Maharashtra.

In Q2FY08, VOL has reported net sales of Rs. 37.21 vs Rs. 18.67, clocking a growth of 99.3% y-o-y. The growth in topline is mainly on account of higher production of IBB and increased demand of ATBS, both in terms of volume and value. IBB accounted for about 75% of topline and ATBS the rest. The production in terms of volume was about 870 MT for ATBS and 3,000 MT of IBB, of which exports to BASF, USA accounted for close to 1,300 MT. VOL has reported an 898.3% jump in EPS y-o-y, to Rs. 6.83 in Q2FY08. On a half yearly basis, VOL has an EPS of Rs. 9.8, surpassing even FY07 EPS of Rs. 5.34.

VOL could achieve a sales target of Rs. 138.50 cr and an EPS of Rs. 20.33 in FY08(E). VOL is currently quoting at 6.8 times FY08 (E) EPS. Existing investors can look at adding to existing positions at current levels for a price target of Rs. 180 (CB) by the end of this financial year, while fresh investors could wait for corrections up to Rs.120 [CUM Bonus] to take fresh exposure.

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