Tatva Chintan Pharma Chem Ltd. share price target

Tatva Chintan is transitioning into a stronger growth phase primarily driven by SDA recovery, clearer electrolyte-salt commercialization, scalable agro/pharma pipelines, and a structurally high-entry-barrier semiconductor opportunity.

We expect the company to sustain robust growth over FY27E, led by stronger volume offtake in SDA segment driven by Euro-7 demand, scale-up of agro and pharma intermediates, and increasing contribution from electrolyte salts.

Tatva Chintan Pharma Chem’s (TATVA) performance showed signs of improvement in Q4FY25 on the revenue front, but lower gross profit marred profit recovery. TATVA is hopeful of a sharp recovery in FY26, as new products commercialise in PASC and SDA volume recovers.

Tatva Chintan Pharma Chem’s (TATVA) revenue grew 7.3% QoQ, but gross profit margin collapsed to just 45.9% (vs 57.8% in Q4FY24) due to high-cost inventory, particularly in SDA, where it had to take 15-20% price.

In FY23, Tatva Chintan (TATVA) earnings were hurt from a downcycle in its SDA business, which should resume growing FY24 onwards. The addition of a significant new customer to its SDA has the potential to propel growth in the near future. PASC segment will likely reap the benefit of products under qualification and long-term growth on the back of a robust pipeline and cleaner chemistry positioning.

Tatva Chintan’s Q4FY23 revenue rose 26.4% YoY to Rs1.2bn as SDA revenue recovered to Rs0.5bn, up 41% YoY. However, gross profit margin dip of 400bps to 39.8% was disappointing (partly from a change in product mix) considering the company has guided for a sequential improvement in margins.

Tatva Chintan’s Q3FY23 revenue rose 15% YoY / 34% QoQ to Rs1.2bn as SDA revenue recovered to Rs0.6bn, up 6.4% YoY / 5.7x QoQ. However, non-SDA segments, which hitherto performed well, dipped QoQ. The disappointment come from an 800bps QoQ contraction in gross profit margin to 43.8% due to higher bromine and solvent prices, which have subsequently corrected.

Tatva Chintan’s Q2FY23 revenue fell 27.1% YoY and EBITDA plunged 68.9% YoY due
to lower SDA sales, which seems very disappointing, but we believe this situation is
transitory.

Tatva Chintan’s Q4FY22 revenue declined 9.3% YoY and was 11% below our estimates on higher dip in SDA revenue. However, gross margin expansion of 280bps QoQ, despite inferior revenue mix, was a positive surprise. It anticipates SDA revival only in H2FY23, and has guided for flattish revenue for FY23. However, we expect an upside risk if auto production normalises, and benefits from pent-up demand and large inventory get liquidated.

We initiate coverage on Tatva Chintan Pharma Chem (Tatva Chintan) with a BUY rating, and Clean Science & Technology (Clean Science) with a REDUCE rating. These two companies operate in niche categories with significant exposure to smart and green chemistries.

Tatva Chintan Pharma Chem Limited IPO Note Issue Open: July 16 July 20 2021 Price Band: Rs. 1073 1083 *Issue Size: 4,616,805 eq shares (Fresh Issue of 225 cr + Offer for sale of 275 cr) Issue Size: Rs.500.0 cr Reservation for: QIB Upto 50% eq sh Non Institutional atleast 15% eq sh Retail Upto 35% eq sh

Incorporated in 1996, Tatva Chintan is a specialty chemicals manufacturing company engaged in the manufacture of a diverse portfolio of structure directing agents (SDAs), phase transfer catalysts (PTCs), electrolyte salts for super capacitor batteries and pharmaceutical and agrochemical intermediates and other specialty chemicals (PASC). Apart from customers in India, the company also exports products to over 25 countries, including the US, China, Germany, Japan, South Africa, and the UK. As on March 31,...

Public issue of 4,616,805 Equity shares of Face value Rs. Total Public 10 each, (Comprising of fresh issue of 2,077,562 Equity Shares* (Rs. 225 cr.) and Offer for Sale of 2,539,243 Equity Share Pre Issue (Nos. Cr.)...

IPO NOTE

Incorporated in 1996, Tatva Chintan Pharma Chem Limited (Tatva Chintan) is a leading manufacturer of Structure Directing Agents (SDAs) and Phase Transfer Catalyst (PTCs) that have various applications in green chemistry. The company also manufactures Electrolyte Salts for super capacitor batteries (SCB) and Pharmaceutical & Agrochemical intermediates and other specialty chemicals (PASC). Its Product have