Shares of Tata Chemicals hit an all-time high on August 19 at ₹1,182. The stock has risen from around ₹870, a month ago to currently trading at around ₹1,087.50 gaining as much as 25 percent in this period. The stock has been under pressure since the start of the year, but since June 30, the stock has started inching up slowly. From July 2022 to the present, it has increased by 38%. So far in August, it has surged 15.14%.
On August 10, the stock increased by 9% intraday after the company reported a 104.51 percent increase in consolidated net profit to ₹589 crore for the fiscal quarter ending June 30. The company's net profit stood at ₹288 crore in the corresponding quarter of the previous fiscal.
Since its Q1 result announcement, the stock has gone from ₹957 to ₹1,087 levels, delivering a return of over 13.58. Total revenue increased by nearly 33.32% to ₹4,041 crore in the June-end quarter of FY23, compared to ₹3,031.5 crore in the same period last year.
Further, the company’s EBITDA grew almost two-fold to ₹1,015 crore in Q1FY23 as against ₹601.2 crore in the corresponding quarter of last year. Similarly, Tata Chemicals' EBITDA margin increased by 25.41 percent year on year, from 20.19%, expanding by almost 522 bps, which is the highest to date.
Tata Chemicals in its FY22 annual report said Soda Ash is expected to remain on a growth path in India and around the world with the increase in demand for solar glass and lithium carbonate. In India, recovery in soda ash demand across application sectors, an anticipated reduction in imports, and increasing energy and freight costs will necessitate an increased focus on operating rates. This, coupled with the ongoing programs on driving cost reductions and efficiencies, will likely yield benefits in margins.
The company has incurred a CAPEX of ₹13 billion in FY22, with ₹5.8 billion spent on its India operations. The management aims to incur a similar level of Capex in FY23, with an additional ₹20 billion being deployed under Phase II of the expansion. The latter will be completed within five years, with Soda Ash/Sodium Bicarbonate capacity being enhanced by 30% - 40% and silica capex by 5x to 10,000mtpa.
Domestic brokerage firm ICICI Securities is bullish on the stock after Q1 numbers. The brokerage firm has a target price of ₹1155/share on Tata chemicals, which hints toward an upside of 7 percent from its latest close.
ICICI Securities said that soda ash prices will remain firm in the next 18-24 months and the demand for soda ash is strong in spite of high prices. Demand is booming in the detergent and glass industries, it said.
ICICI Securities said that if energy prices remain at current levels, soda ash prices will have high realizations in the future.
Under basic chemicals, TCL offers soda ash, sodium bicarbonate, cement, salt, marine chemicals, and crushed refined soda. Specialty chemical consists of solution towards Agro chemical through Rallis and other specialty solutions such as nutritional products and HDS. Basic chemicals account for 75% of overall revenue, while the rest comes from specialty products.
Meanwhile, foreign institutional investors increased their holdings from 13.62% to 14.99% in the June 2022 quarter. Mutual funds too raised their stake from 7.36% to 7.58% in the June 2022 quarter.
An average of 07 analysts polled by MintGenie have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
