Tata Chemicals Limited stock prices dipped more than 6 percent today and currently trade at a price of Rs 930. In the past 6 months, the stock has lost around 20 percent ranging from Rs 1,166 to the current price levels.
Tata Chemicals Limited is engaged in the business of manufacturing and selling a variety of chemicals and agricultural products. The firm has three reportable segments – Inorganic Chemicals, Agri Inputs, and Others. The majority of company’s revenue is coming from domestic operations itself.
Tata Chemicals is the world’s third-largest producer of soda ash with a global capacity of 4 million tonnes per annum with manufacturing operations spread across India, US, UK, and Kenya.
The sharp fall in stock prices mentioned above is observed after there has been a buzz around soda ash prices. There has been a fall in soda ash prices in China since mid-March and the market, lately, reacts to unexpected news of substantial capacity addition in Inner Mongolia from May this year.
Having a quick glance at the financials of the company, the revenues and PAT figures have decreased in the recent quarters with revenues going down from Rs 4,240 crores in Q2 to Rs 4,150 crores in Q3. Net profits too went down from Rs 640 crores in Q2 to Rs 520 crores in Q3.
On the contrary, the profitability ratios have shown some improvement with ROE moving from 3.02 percent in FY20-21 to 7.22 percent in FY21-22. Moreover, the ROCE numbers shifted from 4.72 percent during FY20-21 to 7.58 percent in FY21-22.
As per the data available for the quarter ending December 2022, promoters hold a 37.98 percent stake in the company. FIIs, on the other hand, reduced their stake with the recent movement being 14.92 percent in Q2 to 14.43 percent in Q3.
Kotak Institutional Equities came up with a ‘Buy’ recommendation on the stock with a target price of Rs 1,210 indicating an upside of around 31 percent as compared to the current price levels.
The rationale behind giving such a recommendation is pertaining to Q4FY23 earnings which are expected to be strong because of the upward revisions in US domestic contract prices as well as the firm’s realizations on US exports. Moreover, the downtrend in energy costs is also contributing to be a plus for the Indian business.
Written by Amit Madnani
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