Tata Chemicals (TTCH.BO, Buy, PT Rs 450, 36% upside) UBS: India Mid-Caps TOP PICKS - September 2011

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• Stock at 14% cash flow yield at mid cycle assumptions -- half
of Chinese Soda Ash producers (~18% of global producers)
just recovering cash costs.
• Current 5.2m mt Soda Ash, 1.26m mt UREA, 0.8m mt of
DAP/SSP, 0.5m mt of salt –
•Globally second largest producer of Soda Ash, 10% of
global capacity and 21% of global natural soda ash
capacity
•Owns 50% stake in Rallis, leading pesticide producer in
India
• Soda Ash and Urea generate stable and robust cash flows
• Assumptions: 1) Soda Ash prices stabilize at these levels. This is
conservative assumption as one competitor has taken
$20/Tonne price increase in USA. 2) Tata Chemicals is able to
obtain gas supplies for Urea production.
• Shareholding: Promoter 31%
• Valuation: SOTP methodology using multiple based approach.
We value Soda ash/fertilizers/IMACID business at 7x FY13E
EV/EBITDA and value cement business at 6x FY13E EV/EBITDA

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