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Tata Chemicals shares may fall another 30%, says one analyst after a quarterly loss
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Tata Chemicals was in focus through most of the March series on expectations of a potential IPO of Tata Sons.
Shares of Tata Chemicals are down 3% on Tuesday after the company reported a loss in the March quarter. The Tata Group enterprise reported a loss due to a one-time cash charge.
The one-time cash impairment of ₹963 crore pertained to the UK soda ash business. Aside of the loss, the company also reported a 21% drop in consolidated revenue compared to the year-ago quarter.
Tata Chemicals’ basic chemistry business also saw a 21% drop in revenue. It also reported an EBIT loss of ₹682 crore. For the specialty products business, revenue declined by 20% year-on-year and it also reported an EBIT loss of ₹39 crore.
In its post-earnings conference call, the company said that the quarter was impacted by the US exports and European soda ash price correction. The management also said that key challenges continue in the European market and that Turkish capacities are being sold to the rest of the month.
Brokerage firm Kotak Institutional Equities has retained its “sell” recommendation on the stock with a price target of ₹770, which implies a potential downside of 30% from Monday’s closing levels. The brokerage expects Tata Chemicals’ earnings run-rate to remain near current levels for most parts of financial year 2025.
Kotak Institutional Equities has cut its Earnings Per Share (EPS) estimates on Tata Chemicals by another 12% to 20%.
Tata Chemicals was in focus through most of the March series on expectations of a potential IPO of Tata Sons. A brokerage note had pointed that the best way to play the value unlocking theme would be through Tata Chemicals. Post that note, the stock had surged over 40% within a few sessions.
However, CNBC-TV18 had reported on March 9 that the Tata Sons IPO is unlikely to happen anytime soon, post which the stock saw some correction from elevated levels. Kotak concurs with the assessment, stating that it does not believe that the Tata Sons IPO will happen soon.
The brokerage added that any potential hopes of the company expanding in a big way into battery chemicals, also appears to be “misplaced.”
Shares of Tata Chemicals are down 3.5% at ₹1,065.15. The stock is down 2% over the last month. Shares are down nearly 5% so far in 2024. The stock had gained 15% in the month of March, but had declined 9% in February and 7% in January this year.
GHCL, another manufacturer of Soda ash in the country is also seeing its shares decline 2.5% on Monday.
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