Accumulate Tata Chemicals; tgt of Rs 384: Unicon Investment

“Tata Chemicals Ltd (TCHL) outperformed Unicon Estimates registering 23% YoY topline growth in Q2 FY12. Strong performance in US, UK and India helped the company. TCHL’s US subsidiary TCNA showed 24% YoY jump in revenues to INR 5.6bn. In Europe, TCE showed a strong topline growth of 29% YoY to INR 5.5bn driven by healthy contribution from British salt. IMACID also registered a robust growth of 28% YoY in the quarter EBITDA jumped by ~39% YoY to INR 7,558mn while EBITDA margin increased by 273bps to 21.2%. Net Profit also expanded by 34.8% YoY to INR 3,453mn while net profit margin grew marginally from 8.6% to 9.5%. TCHL is likely to add capacity of 50,000 TPA in SSP (Single Super Phosphate) and 200,000 TPA in salt by March FY2012. Besides it is also looking to add 400,000 TPA in soda ash at the cost of USD 100mn. (Domestic demand for soda ash and sodium bicarbonate is expected to rise by 5% and 14% respectively during FY2012.).”

“TCHL would maintain its growth momentum based on strong sales of soda ash (in US and India), acquisition of British Salt (UK) and growth in domestic agri-based businesses. Soda-ash & Salt divisions are expected to maintain their growth trajectory in FY12. Soda ash business margin is expected to improve due to price hikes implemented by the company for CY11. Acquisition of Rallis provides TCHL immense opportunity to tap new markets in domestic region with a wider product range. Synergy benefits of these businesses would also boost margins for TCHL. Stock is trading at 9.1x its FY13E earnings. We recommend ACCUMULATE on the stock with a price target of INR 384,” says Unicon Investment research report.

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