Shares of Tata Chemicals jumped nearly 7.5 percent in Thursday's trade after Morgan Stanley maintained an overweight rating on the stock.
During Thursday’s intraday, the stock opened with a gap up of ₹28 and rose further to hit an intraday high of ₹1,125 per share. At 12:40 pm, the scrip traded at ₹1,089.40, around 4 percent above its previous close of ₹1,047.95.
Morgan Stanley has upgraded Tata Chemicals to Overweight amid sustained tightness in soda ash and better cost control. The global brokerage firm indicated that speciality chemicals have significant value creation potential over 2025, implying a near-doubling of market capitalization as capex rises.
The brokerage highlights that companies benefit not only from supply chain shifts away from China but also from upside from Europe +1. "We see a 22% F22-25E CAGR in profits despite some normalization in demand and key product margins. "We are lowering our earnings estimates for commodity chemicals (ex-soda ash) to reflect headwinds to demand," said Morgan Stanley.
Earlier, domestic brokerage firm ICICI Securities had also given a ‘buy’ call on the stock with a target price of ₹1,155.
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. ICICI Securities said basic chemicals account for 75 percent of overall revenue, while the rest comes from specialty products.
The company reported a 104.51 percent increase in consolidated net profit to 589 crore for the June-ending quarter, compared to a net profit of ₹288 crore in the same quarter the previous fiscal.
Total revenue increased by nearly 33.32 percent to ₹4,041 crore in the June-end quarter of FY23, compared to ₹3,031.5 crore in the same period last year.
Tata Chemicals' 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 percent, expanding by almost 522 bps, which is the highest to date.
Meanwhile, foreign institutional investors increased their holdings from 13.62 percent to 15 percent in the June 2022 quarter. Mutual funds too raised their stake from 7.36% to 7.58% in the June 2022 quarter.
According to a MintGenie poll, an average of 7 analysts 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.