Reduce Tatva Chintan Pharma Chem; target of Rs 1380: Deven Choksey

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26 Aug, 2025 12:21

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Tatva Chintan Pharma Chem delivered a strong Q2 FY26 performance, with broadbased recovery across segments and sharp improvement in profitability. Operating revenue rose 6% QoQ and 48% YoY to INR 1,235 mn outperformed our estimate by 26.8%, supported by improved utilization and a favourable product mix. EBITDA grew at 28% QoQ and 298% YoY to INR 222 mn, reflecting better operating leverage and gross margin expansion. Margin gains were driven by higher volumes in SDA and increased occupancy across facilities. The Structure Directing Agents (SDA) segment was the standout performer, with revenue at INR 593 mn, rising 51% QoQ and 119% YoY. Growth was supported by improving global demand, macro developments in the automotive sector, and new molecule opportunities created by the upcoming Euro 7 emission standards. SDA’s strong traction materially lifted overall revenue and margins. Phase Transfer Catalysts (PTC) posted stable growth of 1% QoQ / 7% YoY. The Pharma, Agro and Specialty Chemicals (PASC) segment declined 31% QoQ due to INR 26 crore of goods in transit, though YoY growth remained healthy at 19%. Management stated that real manufacturing activity was significantly higher, with PASC plants operating at very high occupancy. Electrolyte salts reported 47% QoQ growth, though YoY was marginally negative.

We have rolled forward our valuation to Sep’27 estimates and value Tatva Chintan at 40.0x Sep’27E EPS, arriving at a target price of INR 1,380. We upgrade the stock from ‘SELL’ to ‘REDUCE’, as we anticipate strong earnings momentum over the next 2–3 years driven by improved execution across key segments; however, we believe these positives are largely priced in.

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