Buy Tata Chemical, tgt Rs 391: Karvy

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Karvy research has maintained buy rating on Tata Chemicals with target price of Rs 391, in its July 03, 2008 report. "The Q4FY08 results for Tata Chemicals (Consolidated) were above our expectation in term of net sales and net profit (including profit from sales of investment of TCS and Tata investment of Rs4,874.7million). Net sales increased by 19% (YoY) and decreased 14% (QoQ) to Rs 14603.6 million against our expectation of Rs 13,545 million. The revenue growth (YoY) was primarily driven by sales of soda ash, vacuum salt and STPP (Sodium Tripolyphosphate). During Q4FY08, globally, soda ash demand has remained tight. International soda ash spot prices have remained firm over USD 350/tonne."

 

"At the current market price of Rs 292 the stock is trading at 12x FY09E and 9xFY10E expected earnings. We are reducing our valuation multiple for core business (Chemical and Fertiliser) from FY09X11 to FY10X10 due to lower than our expected EBITDA margin in FY08. We maintain our per value share of Rs 69.8 for new business (Procurement and distribution of fresh fruits & vegetables and manufacturing of bio-fuels) on the basis of market capitalization/sales of 1.7 times. Consequently, we are decreasing our target price from Rs 418 to Rs 391 and revising our rating from Outperformer to BUY due to correction in stock price" according to Karvy report.  

 

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