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Tata Chemicals
Cluster: Vulture's Pick
Recommendation: Buy
Price target: Rs400
Current market price: Rs331
Q2FY2012 results: First-cut analysis
Result highlights
Operating performance significantly higher than expectated: Tata
Chemicals Ltd (TCL)'s revenue from operation during Q2FY2012 was
significantly higher than our expectation mainly due to a higher than
expected growth in the volume offtake and a higher realisation across
the segment. The operating profit margin (OPM) at 18.9% shows an
increase of 450 basis points compared to Q2FY2011 due to an increase
in the realisation of products across segments and geographies. The
adjusted profit after tax (PAT; after minority interest) increased by
134.3% to Rs293.2 crore aided by margin expansion and higher than
expected other income during the quarter. There was an extraordinary
expense including a marked-to-market (MTM) foreign exchange (forex)
loss of Rs47.3 crore on foreign debt and a profit of Rs30.5 crore from
the sale of assets.
Revenue growth driven by higher volume and realisation: The
revenue for the quarter grew by 19.7% year on year (YoY) to Rs3,571.0
crore. The revenue from the chemical segment grew by 27.2% to
Rs1,638.2 crore and that from agri inputs jumped by 27.9% to Rs513.7
crore. On the other hand, a higher volume offtake of customised
fertiliser helped the revenue from the fertiliser segment to increase
to Rs1,416 crore, showing an increase of 13.7% YoY.
A sharp increase in OPM gives boost to bottom line: The operating
profit margin (OPM) during the quarter saw a significant increase of
450 basis points to 18.9% because of the improving realisation of
products combined with efficient operation and distribution of
products and access to low-cost resources. An increase of 580 basis
points in the margin of the fertiliser segment to 8.5% and an
expansion of 680 basis points in the margin of the inorganic segment
to 21.4% helped the company to post a considerable growth in the
bottom line. Going forward, the margin may come under pressure due to
a further rise in the input cost and the company's inability to pass
on the same to the consumer beyond a certain limit.
Reported PAT increased by 116% during quarter: The reported profit
after tax (RPAT) during the quarter increased by 116% to Rs275.4
crore. The net profit was dented to the extent of Rs47.3 crore due to
an MTM charge toward foreign currency debt and Rs10 crore for non-
recognition of inventory gains on phosphoric and potassic fertilisers
in accordance with the circular issued by the Department of
Fertilizers.
Outlook and valuation: Despite the input cost pressure, the
company's ability to manage cost and access to low-cost resources is
expected to help it deliver a strong performance on the back of a
relatively healthy demand for soda ash and an increase in the offtake
of the customised fertilisers. Consequently, we maintain our Buy
recommendation on the stock with a price target of Rs400. We value TCL
at 9x FY2013E earnings per share (EPS) and investment value of Rs41
per share.
--
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Chemicals
Cluster: Vulture's Pick
Recommendation: Buy
Price target: Rs400
Current market price: Rs331
Q2FY2012 results: First-cut analysis
Result highlights
Operating performance significantly higher than expectated: Tata
Chemicals Ltd (TCL)'s revenue from operation during Q2FY2012 was
significantly higher than our expectation mainly due to a higher than
expected growth in the volume offtake and a higher realisation across
the segment. The operating profit margin (OPM) at 18.9% shows an
increase of 450 basis points compared to Q2FY2011 due to an increase
in the realisation of products across segments and geographies. The
adjusted profit after tax (PAT; after minority interest) increased by
134.3% to Rs293.2 crore aided by margin expansion and higher than
expected other income during the quarter. There was an extraordinary
expense including a marked-to-market (MTM) foreign exchange (forex)
loss of Rs47.3 crore on foreign debt and a profit of Rs30.5 crore from
the sale of assets.
Revenue growth driven by higher volume and realisation: The
revenue for the quarter grew by 19.7% year on year (YoY) to Rs3,571.0
crore. The revenue from the chemical segment grew by 27.2% to
Rs1,638.2 crore and that from agri inputs jumped by 27.9% to Rs513.7
crore. On the other hand, a higher volume offtake of customised
fertiliser helped the revenue from the fertiliser segment to increase
to Rs1,416 crore, showing an increase of 13.7% YoY.
A sharp increase in OPM gives boost to bottom line: The operating
profit margin (OPM) during the quarter saw a significant increase of
450 basis points to 18.9% because of the improving realisation of
products combined with efficient operation and distribution of
products and access to low-cost resources. An increase of 580 basis
points in the margin of the fertiliser segment to 8.5% and an
expansion of 680 basis points in the margin of the inorganic segment
to 21.4% helped the company to post a considerable growth in the
bottom line. Going forward, the margin may come under pressure due to
a further rise in the input cost and the company's inability to pass
on the same to the consumer beyond a certain limit.
Reported PAT increased by 116% during quarter: The reported profit
after tax (RPAT) during the quarter increased by 116% to Rs275.4
crore. The net profit was dented to the extent of Rs47.3 crore due to
an MTM charge toward foreign currency debt and Rs10 crore for non-
recognition of inventory gains on phosphoric and potassic fertilisers
in accordance with the circular issued by the Department of
Fertilizers.
Outlook and valuation: Despite the input cost pressure, the
company's ability to manage cost and access to low-cost resources is
expected to help it deliver a strong performance on the back of a
relatively healthy demand for soda ash and an increase in the offtake
of the customised fertilisers. Consequently, we maintain our Buy
recommendation on the stock with a price target of Rs400. We value TCL
at 9x FY2013E earnings per share (EPS) and investment value of Rs41
per share.
--
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