Tatva Chintan Pharma Chem Q3 Results Review - SDA Revenue Recovers; But Margins Dip: ICICI Securities

ICICI Securities Report

Tatva Chintan Pharma Chem Ltd.’s Q3 FY23 revenue rose 15% YoY / 34% QoQ to Rs 1.2 billion as structure directing agents revenue recovered to Rs 0.6 billion, up 6.4% YoY / 5.7 times QoQ. However, non-SDA segments, which hitherto performed well, dipped QoQ.

The disappointment come from an 800 bps QoQ contraction in gross profit margin to 43.8% due to higher bromine and solvent prices, which have subsequently corrected.

Company has refrained from taking price hikes as it opted to support European customers who suffered from unfavorable currency movements.

SDA prices have been stable in Q4-to-date. Tatva Chintan expects SDA revenue to be further boosted as Chinese customers resume purchase likely from Q1 FY24.

Margins too are likely to completely recover in Q1 FY24E as Q4 FY23E will be impacted due to existing inventory of high-cost solvents.

Company is in the process of commissioning its new plant, which is expected to start commercial production from Feb 2023 and likely to double the total revenue in next two-three years.

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