Tata Chemicals is a multinational chemical behemoth featuring operations in India, the United States, the United Kingdom, Kenya, and South Africa, it is Asia's largest saltworks, as well as the world's third-largest soda ash and sixth largest sodium bicarbonate manufacturer. On April 29, 2022, the Board of Directors proposed a dividend of Rs. 12.5 per share, or 125 per cent, for the fiscal year 2021-22, subject to shareholder approval at the company's 83rd Annual General Meeting, which will be placed on July 6, 2022. ICICI Securities has issued a buy call on the stock, with a target price of Rs 1155 in a target period of 12 months, following the company's Q4FY22 results.
Q4FY22 results of Tata Chemicals Ltd (TCL) as per ICICI Securities
- Numbers were above our estimates, led by better performance from North America and India regions. Bottomline was beat due to lower taxes.
- Reported revenue growth of 32% YoY to Rs 3480.7 crore, led by higher growth in the basic chemical segment across four units.
- Gross margins improved 80 bps YoY to ~79.8% while EBITDA margin expanded 816 bps YoY to 18.9% due to operating leverage.
- EBITDA was up 133% YoY to Rs 657.4 crore.
- Adjusted PAT was at Rs 408 crore vs. Rs 11.8 crore in Q4FY21, led by lower taxes (8% vs. 64% in Q4FY21).
Key investment rationale for TCL according to the brokerage
- Improvement in the soda ash pricing environment bodes well for future growth outlook.
- Revival in export demand for North America unit to sustain group performance.
- Higher share of speciality business to command better valuations for the overall group.
Buy for a target price of Rs 1155
ICICI Securities has claimed that "The stock appreciated at 55% CAGR in last three years. We revise our rating on the stock from HOLD to BUY due to better soda ash pricing environment. We value Tata Chemicals at SOTP valuation to arrive at a revised target price of Rs 1155/share (earlier Rs 1035/share)."
Fall in soda ash prices and rise in crude to impact EBITDA/tonne and suppressed demand of end user industries are the key risks for the stock according to the brokerage.
The stock has been picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.