Tata Chemicals drops 5% on profit booking post solid Q2 results

Analysts believe that prices and demand will remain stable in the near term while increase in energy prices and feedstock (limestone, coke and raw salt) remains a key concern.

Profit-booking was seen in shares of Tata Chemicals as it dropped 5 per cent to Rs 1,125.15 in Friday’s intra-day trade after the company reported nearly three-fold jump in consolidated profit after tax (PAT) to Rs 685 crore in September quarter (Q2FY23) from Rs 248 crore, in the year ago quarter.

Total income from operations, too, grew 40 per cent year-on-year (YoY) to Rs 4,239 crore, as against Rs 3,022 crore in Q2FY22. Earnings before interest, taxes, depreciation, and amortization (EBITDA) margin, on the other hand, for the quarter rose by 510 bps to 22.7 per cent.

"Soda ash prices continue to remain robust across geographies resulting in improved realisations in US, UK and Kenya. EBITDA growth amidst a favorable market environment and a challenging cost situation," the company said.

Soda ash prices increased significantly across all units backed by robust demand from the downstream automotive glass manufacturing and detergent sector. Sales volumes of soda ash across all units in H1 declined 6 per cent YoY (1742 MT vs. 1845 MT). 

Analysts at ICICI Securities believe that the prices and demand will remain stable in the near term while increase in energy prices and feedstock (limestone, coke and raw salt) remains a key concern. Further, analysts await management commentary on margin stability, going forward.

At 02:24 PM; Tata Chemicals traded 4.6 per cent lower at Rs 1,133, as compared to 0.05 per cent rise in the S&P BSE Sensex. Despite of Friday's decline, the stock outperformed the market as it surged 27 per cent in the past three months, as compared to 5 per cent rise in the S&P BSE Sensex. The stock had hit a record high of Rs 1,215 on October 11, 2022.