Hold Tata Chemicals: target of Rs 520: ICICI Direct

ICICI Direct's research report on Tata Chemicals

Tata Chemicals reported flat revenues to the tune of Rs 2606 crore against our estimate of Rs 2618 crore. The basic chemical segment revenue was down 1% YoY to Rs 1987 crore while the same from speciality products was up 2% YoY to Rs 618 crore. Higher growth from Magadi (up 30.5% YoY) along with India (up 7% YoY) & Europe (up 7% YoY) led growth in the basic chemical segment revenue. However, the same declined 14.9% YoY in the US market. Gross margins witnessed an improvement of 725 bps QoQ to 79.6%, leading EBITDA to beat our estimates. Further, control on other opex also helped a better operational performance. EBITDA remained flat at Rs 472 crore against our estimate of Rs 407 crore. PAT was up 10% YoY to Rs 160.9 crore, assisted by lower tax rate (21% vs. 23% in Q3FY20).

Outlook

We value the company on SOTP basis and arrive a target price of Rs 520 (earlier Rs 490) including investment portfolio value. We maintain HOLD rating on the stock.