Expect export market to bounce back in Q4 -Tata Chemicals

Expect export market to bounce back in Q4 -Tata Chemicals

Update on the Indian Equity Market:

On Tuesday, NIFTY closed at 14,648 (+2.5%). Top gainers in NIFTY50 were Tata Motors (+16.9%), Shree Cement (+7.2%) and UltraTech Cement (+6.9%). The top losers were HDFC Life (-2.5%), Bajaj Finserv (-2.2%), and Hero Motocorp (-1.5%). The top sectoral gainers were AUTO (+4.1%), REALTY (+3.8%), and BANK (+3.5%) and there were no sectoral losers.

Excerpts of an interview with Mr. R Mukundan, MD & CEO – Tata Chemicals with CNBC -TV18 dated 29th January 2021:

  • Tata Chemicals is expecting the export market to bounce back in the 4QFY21 quarter.
  • They are expecting exports from the US to be better than last year’s levels in Q4. Demand in South-East Asia should also normalise by H1-H2 FY22.
  • The market in which the Magadi division faced a bit of pressure is South-East Asia. There the tourism industry is hit very hard. The demand for container glass which goes into beverages and drinks had been impacted severely.
  • They believe by H1-H2 of FY22 that demand would come back. But what Magadi has done is to get a lot of cost orders in the system. So they have posted a solid margin this quarter and will continue to maintain a good set of numbers.
  • He thinks that revenues of Rs 170 bn in the next 4-5 years are doable. Rs 170 bn is board-approved plan and that guidance still remains. They are not way off from that.
  • By the end of FY21, some of the projects will come on-stream, and by 2022-23 almost 50 percent of the capital would be deployed, and it will be on-stream.
  • They anticipate an incremental revenue of about Rs 14 bn and an incremental contribution or EBIT margin of close to about Rs 6 bn as a result of investments of Rs 2,600 crore.

Consensus Estimate: (Source: market screener and investing.com websites)

  • The closing price of TATACHEM was ₹ 521/- as of 2-February-2021.  It traded at 32x/ 15x/ 13x the consensus earnings estimate of ₹ 16.5/ 34.5/ 39.7 for FY21E/22E/23E respectively.
  • The consensus price target is ₹ 448/- which trades at 11x the earnings estimate for FY23E of ₹ 39.7/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”






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