Accumulate Tata Chemicals; target Rs 400: Emkay

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Accumulate Tata Chemicals; target Rs 400: Emkay

Emkay Global Financial Services is bullish on Tata Chemicals (TCL) and has recommended accumulate rating on the stock with a target price of Rs 400 in its February 13, 2012 research report.

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Emkay Global Financial Services is bullish on Tata Chemicals (TCL) and has recommended accumulate rating on the stock with a target price of Rs 400 in its February 13, 2012 research report.

"Tata Chemicals (TCL)'s consol Q3FY12 results were in line with our est. Standalone business & TCNA (US business) reported strong performance however TCE (European business) disappointed. Consolidated revenues of Rs 38 bn, +32% yoy, were marginally above estimates of Rs 36.8bn. TCL reported EBITDA of Rs 5.6bn, 26% yoy with margins of 14.6% in line with estimates. Company reported APAT of Rs 2.3bn, 70% yoy in line with estimates. AEPS for the quarter stood at Rs 8.9. APAT has been adjusted for Rs 207mn of profit on sale of long term investments incl. in other income and Rs 468mn of exceptional items. Reported PAT stood at Rs 2.24bn, 36% yoy."

"Company's US subsidiary - TCNA (earlier GCIP) reported revenues of Rs 5.6 bn, +27% yoy significantly ahead of est of Rs 3.6bn, TCNA reported PAT of Rs 660mn, 35% yoy ahead of est of Rs 188mn. European subsidiary - TCE (earlier BMGL) reported revenues of Rs 5.3 bn, +34% yoy in line with est however EBITDA margins disappointed at 14% against est of 18.0%. Resultant APAT stood at loss of Rs 10mn against est of profit of Rs 110mn. IMACID reported revenues of Rs 1.7 bn, +28% yoy, EBITDA of Rs 210 mn with PAT of Rs 170 mn."

"While demand for inorganic chemicals remained strong during the quarter, however rising input costs (imported limestone & coal) created pressure on margins. We maintain our cautious stance on soda ash demand scenario due to global uncertainty. While US, India & Europe sales remain robust however increased supply in South East Asia (primarily China along with Japan, South Korea) is likely to put pressure on soda ash pricing in near future. TCL has undertaken price hikes in soda ash to mitigate cost pressures however full cost escalation could not be passed through. IMACID profitability might also be impacted in next couple of quarters due to decline in phos acid prices. We maintain Accumulate with target of Rs 400," says Emkay Global Financial Services research report.

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