Shares of Tata Chemicals have rallied 7 per cent to Rs 1,002.80 on the BSE in Monday’s intra-day trade in otherwise a weak market. The surge comes after the company reported a consolidated profit after tax (PAT) of Rs 470 crore in March quarter, against Rs 29 crore in the corresponding quarter of last year.
The stock of Tata Group commodity chemicals company had hit a 52-week high of Rs 1,158 crore on October 18, 2021. At 09:16 AM, it traded 6 per cent higher as compared to 0.59 per cent fall in the S&P BSE Sensex.
Tata Chemicals reported consolidated revenue growth of 32 per cent year on year (YoY) to Rs 3,480.7 crore against Rs 2,636 crore in Q4FY21, led by growth in the basic chemical segment. The growth in the basic chemical was mostly led by improved realisations across key geographies.
The management said the operating performance reflects higher volumes, realisations, and favorable market conditions. These results have been achieved in the context of a challenging input cost & energy environment, it added.
“The company witnessed an improvement in soda ash realisation across all units. Since there is an improvement in the demand environment across end user industries along with no large capacity addition across the globe to support soda ash prices ahead,” ICICI Securities said in a note.
That apart, while the global demand environment continues to be positive across their products and applications, Tata Chemicals said, the supply-side environment, especially energy and input costs, remain at elevated levels along with logistic challenges. The company has planned for Phase II capacity expansion of soda ash (~ 300 kt) and bicarb (70 kt) and specialty silica capacity by 50kt for a capex outlay of around Rs 2,000 crore in India.
Tata Chemicals is a leading supplier of choice to glass, detergent, industrial and chemical sectors. The company has a strong position in the crop protection business through its subsidiary company Rallis India.
"On a one-year forward basis, Tata Chemicals traded at an average EV/EBITDA of 8.8x over the last 10 years. It is now trading at 10.6x FY23E EV/EBITDA, implying a premium of 20 per cent. We expect a revenue/EBITDA/PAT CAGR of 14 per cent / 13 per cent / 6 per cent over FY22-24. Factoring the strong operating performance in Q4-FY22, we have raised our FY23/FY24 EBITDA estimate by 5 per cent each. We maintain our Neutral rating with a SoTP-based target price of Rs 1,045/share," wrote analysts at Motilal Oswal Securities in a post result note.