The shares of one of the world’s third-largest soda ash producers received an underweight call from Morgan Stanley with a projected downside of 20%. The company has a market capitalization of ₹26,734 crores.
The shares of Tata Chemicals Ltd fell by 4% to an intraday low of ₹1,018.35 apiece on Friday.
Tata Chemicals Ltd(TCL) manufactures and exports basic chemistry and specialty products.As part of the Tata Group, the company holds a strong market share in the global soda ash industry.
It operates in India, North America, Europe, and Africa, offering a diversified product portfolio that includes both basic chemistry products and specialty products.
TCL is third largest soda ash producer globally, with over two-third of its capacity being natural soda ash translating into cost-effective production. TCL is also the 6th largest producer of sodium bicarbonate in the world, and one of the leading agri-services and crop-protection chemical companies in India.
The company’s revenues declined by 21 percent year on year from ₹4,407, crores in Q4FY23 to ₹ 3,475 crores in Q4FY24, while net profit decreased from a profit of ₹692 crores to a loss of ₹ 842 crores.
Tata Chemicals Ltd shares have gained 3 percent in the last six months and 6 percent in a year.
Brokerage firm Morgan Stanley has assigned an underweight rating to Tata Chemicals Ltd., reducing the company’s price target from ₹904 to ₹843. This indicates a potential downside of 20% from Tata Chemicals’ trading price of ₹1,051.10 as of Friday.
Morgan Stanley believes that the current financial year will focus on monetization and restocking as volume traction improves across various markets. However, this may be countered by increasing competition and pricing uncertainty.
The brokerage opts to remain cautious until an earnings upgrade cycle starts for these companies. Instead, Morgan Stanley favors commodity chemical stocks.
The company is expanding its soda ash capacity by 2.3 MT, increasing it from 0.45 MT to 1.85 MT, through the integration of new capacity with the existing plant. This expansion is scheduled to take place during the annual shutdown in Q1FY25.
Additionally, the company’s EBITDA decreased from ₹3,822 in FY23 to ₹2,847 in FY24, with EBITDA margins dropping from 23% to 18% during the same period. Furthermore, the PAT margin also decreased from 15% to 8%.
Written by Omkar Chitnis
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