Tata Chemicals Ltd. share price target

25 July 2020 TTCH India Soda Ash business reported revenue decline of 10% to INR14.8b, primarily due to significant 9% drop in volumes (to 634kMT) and 1% decline in realizations. This was due to an oversupplied market (incl. increased imports) and decline in Soda Ash prices. Tata Chemicals North America (TCNA) revenues declined marginally by 0.3% YoY to USD480m in FY20, mainly due to 1% drop in realizations (to USD215/MT). However, this was offset by marginal 0.6% increase in sales volume (to 2.23MMT). TCNA revenue (in INR terms) inched up 1% YoY to INR34b while EBITDA increased 8.5% YoY to INR7.4b. Its Europe operations reported ~5% YoY revenue decline to GBP150m in FY20, which was mainly due to the 11% YoY fall in Soda Ash volumes (to 0.29MMT). However, this was partially offset by 1% YoY increase in Bicarbonate volumes (to 0.

Given the improving capacity utilization across plants, and strong performance of Specialty products, we expect PAT to grow at CAGR of 13.7% over FY20-22E, led by a steady growth in revenue and improved margins. We upgrade our rating to ACCUMULATE on the stock with a...

Capex programme altered until demand outlook improves The company announced capex of around | 2400 crore last year to increase capacity for soda ash, soda bicarbonate, cement and salt by FY22-23E. It was about to spend | 900 crore this fiscal, part of the announced capex, which is expected to reduce due to demand challenges post Covid-19. The company would announce the altered capex schedule post Q1FY21E. Revise our rating from REDUCE to...

In our midcap universe of 11 companies, we expect Tata Chemical, VA Tech Wabag, Emmbi Industries and Kanpur Plastipack to be the most impacted stocks given that all these have revenue contribution in excess of 30-35% from the said geographies. We have envisaged the impact of Coronavirus (Covid-19) on our midcap coverage universe based on the revenue contribution from both the US as...

We value the domestic soda ash business at 5x FY21E EV/EBITDA and overseas at 4x EV/EBITDA. We arrive at a target price of | 360, excluding investment portfolio value, providing an upside of 14% over CMP of | 316....

TCL ventured into the silica, nutraceutical business with a capex of ~| 500 crore. The same is expected to generate asset turn of 1.5-2x, RoCE of ~1520%, which we expect to improve return ratio profile for the overall group in the medium to long run. Apart from this, strong growth visibility from cathode active material and Tata Chemical's position in the entire chemistry would put the company in a favourable position in the long run. All this, in...

20 December 2019 Tata Chemicals (TTCH) has acquired the remaining 25% stake in TATA Chemicals Soda Ash Partners Holdings (TCSAP) from the Andover Group, Inc. for USD195m (thus, valuing 100% stake at USD780m) through its wholly-owned subsidiary, Valley Holdings Inc. With this acquisition, TTCH has increased its ownership in TCSAP to 100%, which is a move to simplify enterprise architecture. For FY19, TCSAP had a turnover of USD466m and EBITDA of USD101m. TTCH currently operates a capacity of 2.5MMT of natural soda ash in North America. The worlds largest deposits of trona used for manufacturing natural soda ash are found in the Green River Basin of Wyoming, North America. TTCH acquired the balance 25% stake in TCSAP for USD195m; of this, USD175m will be funded through debt and balance will be funded internally.

At the time of the announcement, the deal valued the Consumer business at ~18x FY19 EBITDA, implying an EV of INR57.6b (INR226/share). As a result, the value/share of the consumer business being transferred to TGBL stands at INR342/share. Against this backdrop, we attempt to analyze the valuation at which the residual business is available. We back calculated the valuations at which the residual business is available factoring in the current market prices. According to our calculations, the enterprise value post demerger adjusts for the value of Rallis, quoted investments and value of TGBLs shares to be received by the shareholders of TTCH. We also adjusted EBITDA post the demerger of the Consumer business and Rallis (we have excluded Rallis EBITDA as we have done the same in our EV calculation). Thus, the residual business is available at 4.4x/3.7x FY20/21E EV/EBITDA.

31 October 2019 higher depreciation and lower other income. PAT was up 10% 1HFY20, revenue/EBITDA/PAT were up 5%/12%/7% YoY. Chemistry EBIT margin expanded strongly by 670bp YoY to 29.8% in the quarter. However, Consumer margin shrank 450bp YoY due to one-time demerger-related cost and higher ad spends. In 9% YoY, led by volume growth of 3% and the balance through realization improvement. EBITDA/MT increased 2x YoY to USD52 in the quarter on the back of improved efficiencies, lower input cost and reduced fixed cost. sales declined 5% YoY due to lower trading volumes, but EBITDA was up 36% YoY led by lower manufacturing cost (RM and energy). EBITDA/MT increased 48% YoY to GBP49. In the EBITDA/MT improved 6% YoY to USD47 (-7% QoQ) with realizations remaining flat YoY (-1% QoQ) and sales volume growth of 1% YoY. We largely maintain our estimates of revenue/EBITDA/PAT CAGR of 9%/15%/11% over FY19-21.