Tata Chemicals - Long Term Bullish Outlook Offsets Near Term Worries: Nirmal Bang

Nirmal Bang Report

Our channel checks and interaction with Tata Chemicals Ltd.'s management suggests potential headwinds in terms of cost pressures in H2 FY23, and downside in demand in the event of a global economic slowdown/recession hurting traditional Soda Ash markets for glass in auto, construction and container glass.

This and the stock’s 23% rally year-to-date, does pose some risk to the tactical momentum in the stock, and hence we suggest entry on declines.

The stock looks reasonably d at 11.7 times price-to-earning on FY24E - implies 35% discount to the five-year median readings on 12-month rolling PE of 18.3 times versus earnings per share compound annual growth rate of 37.3% over FY22-FY24E.

Tata Chemicals' revenue growth will likely improve in FY23E/FY24E to 23.8%/9.0%, with Ebitda margin also remaining healthy at 23.5%/23.9% versus five-year average of 18.3%.

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