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Tata Chemicals (TTCH)
Others
In-line quarter. PAT before exceptionals at Rs2 bn was 4% higher than our estimate
due to lower tax. Operational performance was largely in line with sales 5% higher
than our estimate although margin declined 260 bps qoq to 17% due to lower fertilizer
margin with chemical business sustaining profitability. We leave our FY2012-13E
estimates unchanged. We foresee margin pressure continuing in FY2012E in fertilizers.
Maintain REDUCE with PT at Rs385 (was Rs380), 9X FY2013E and investment
value/share of Rs40.
1QFY12 sales at Rs14 bn, 5% above our estimate due to higher agribusiness sales
Overall sales were 5% above our estimate due to higher sales at Rallis (due to consolidation of
seeds business which is highly seasonal) and IMACID on account of higher pricing. Fertilizer sales
in India were up 4% yoy on account of trading sales which remained steady yoy. Sales volumes of
manufactured complex fertilizers were affected due to potash unavailability and the company
expects the impact to continue in 2QFY12E. Chemical business sales were up 17% yoy on a
reported basis; however, excluding Rs710 mn sales from British salt acquisition, sales growth was
11% yoy driven by mainly price increases taken from January 2011. Soda ash sales volumes were
steady in GCIP/India while Europe business saw decline in sales volumes. The company expects
normal production levels to resume from 2QFY12E.
PAT before exceptionals at Rs2 bn, 4% higher than our estimate due to lower tax
EBITDA at Rs5 bn was largely in line with our estimate although EBITDA margin at 17% was 100
bps below our estimate and dropped 270 bps qoq due to lower fertilizer margin. PBIT margin in
chemical business increased to 20.5% reflecting (1) impact of the soda ash price increase taken
from January 2011 and (2) British Salt acquisition which reported margin at 52% versus 38% last
quarter and (3) higher profitability at Magadi which saw margin dipping in FY2011 due to higher
energy costs.
We leave our estimates unchanged
We leave our FY2012-13E estimates unchanged. We include the impact of following initiatives in
FY2012-13E (1) expanded salt capacity which will become operational by March 2012E, (2) Tata
Swach, (3) debottlenecked capacity of 0.1 mtpa at GCIP by March 2012E, (4) increase in soda ash
prices, (5) branded pulses sales and (6) British Salt acquisition.
Maintain REDUCE with PT at Rs385 (9X FY2013E EPS)
We value TCL at (1) 9X FY2013E (5-year average) EPS of Rs38.8 and (2) investment value/share of
Rs40. We foresee margin pressure continuing in FY2012E in complex fertilizers on account of
sharp input price increases but estimate chemical business margin sustaining at 20% in FY2012-
13E.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Chemicals (TTCH)
Others
In-line quarter. PAT before exceptionals at Rs2 bn was 4% higher than our estimate
due to lower tax. Operational performance was largely in line with sales 5% higher
than our estimate although margin declined 260 bps qoq to 17% due to lower fertilizer
margin with chemical business sustaining profitability. We leave our FY2012-13E
estimates unchanged. We foresee margin pressure continuing in FY2012E in fertilizers.
Maintain REDUCE with PT at Rs385 (was Rs380), 9X FY2013E and investment
value/share of Rs40.
1QFY12 sales at Rs14 bn, 5% above our estimate due to higher agribusiness sales
Overall sales were 5% above our estimate due to higher sales at Rallis (due to consolidation of
seeds business which is highly seasonal) and IMACID on account of higher pricing. Fertilizer sales
in India were up 4% yoy on account of trading sales which remained steady yoy. Sales volumes of
manufactured complex fertilizers were affected due to potash unavailability and the company
expects the impact to continue in 2QFY12E. Chemical business sales were up 17% yoy on a
reported basis; however, excluding Rs710 mn sales from British salt acquisition, sales growth was
11% yoy driven by mainly price increases taken from January 2011. Soda ash sales volumes were
steady in GCIP/India while Europe business saw decline in sales volumes. The company expects
normal production levels to resume from 2QFY12E.
PAT before exceptionals at Rs2 bn, 4% higher than our estimate due to lower tax
EBITDA at Rs5 bn was largely in line with our estimate although EBITDA margin at 17% was 100
bps below our estimate and dropped 270 bps qoq due to lower fertilizer margin. PBIT margin in
chemical business increased to 20.5% reflecting (1) impact of the soda ash price increase taken
from January 2011 and (2) British Salt acquisition which reported margin at 52% versus 38% last
quarter and (3) higher profitability at Magadi which saw margin dipping in FY2011 due to higher
energy costs.
We leave our estimates unchanged
We leave our FY2012-13E estimates unchanged. We include the impact of following initiatives in
FY2012-13E (1) expanded salt capacity which will become operational by March 2012E, (2) Tata
Swach, (3) debottlenecked capacity of 0.1 mtpa at GCIP by March 2012E, (4) increase in soda ash
prices, (5) branded pulses sales and (6) British Salt acquisition.
Maintain REDUCE with PT at Rs385 (9X FY2013E EPS)
We value TCL at (1) 9X FY2013E (5-year average) EPS of Rs38.8 and (2) investment value/share of
Rs40. We foresee margin pressure continuing in FY2012E in complex fertilizers on account of
sharp input price increases but estimate chemical business margin sustaining at 20% in FY2012-
13E.
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