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Tata Chemicals: Good all round performance - Views on News from Equitymaster
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Tata Chemicals: Good all round performance
Feb 13, 2015

Tata Chemicals has announced its December quarter results. The company has reported consolidated topline growth of 5% YoY while a profit of Rs 2.4 bn has been earned as compared to loss during same quarter last year

Performance summary
  • Consolidated topline for the quarter grows 5% YoY, standalone topline grows 13% YoY
  • Operating margins on a consolidated basis expand by 1.2%, leading to a 17% growth in operating profits
  • Bottomline turns positive with profit of Rs 2.4 bn as compared to loss of Rs 159 m during same quarter last year.
  • Net profits on a standalone basis grow 39% YoY on the back of 13% growth in topline
  • Consolidated profits for the 9 month period jump 246% YoY on the back of a 10% growth in topline


  Consolidated Standalone Consolidated
(Rs m) 3QFY14 3QFY15 Change 3QFY14 3QFY15 Change 9mFY14 9mFY15 Change
Net sales 45,805 48,205 5.2% 26,721 30,193 13.0% 122,004 134,703 10.4%
Expenditure 40,775 42,309 3.8% 23,986 27,446 14.4% 107,124 117,240 9.4%
Operating profit (EBDITA) 5,030 5,896 17.2% 2,735 2,747 0.5% 14,880 17,463 17.4%
EBDITA margin (%) 11.0% 12.2%   10.2% 9.1%   12.2% 13.0%  
Other income 189 243 28.6% 263 762 189.5% 829 951 14.7%
Interest (net) 1,656 1,194 -27.9% 464 467 0.8% 4,580 3,485 -23.9%
Depreciation 1,226 1,177 -4.0% 395 471 19.2% 3,572 3,501 -2.0%
Profit before tax 2,337 3,767 61.2% 2,139 2,571 20.2% 7,558 11,428 51.2%
Extraordinary items (1,017) (27) -97.3% (238) -   (1,167) (19)  
Tax 926 856 -7.6% 424 526   2,639 2,860 8.4%
Profit after tax/(loss)  394 2,884 632.1% 1,477 2,046 38.5% 3,752 8,550 127.9%
Share of loss of associate 7 13 86.6% - -   26 47  
Minority Interest 547 490 -10.3% - -   1,789 1,797  
Net profit after minority interest (159) 2,381   1,477 2,046 38.5% 1,937 6,706 246.2%
Net profit margin (%) -0.3% 4.9%   5.5% 6.8%   1.6% 5.0%  
No. of shares (m) 254.8 254.8   254.8 254.8   254.8 254.8  
Diluted earnings per share (Rs)*               (21.8)  
Price to earnings ratio (x)*               NA   
(* on trailing twelve months earnings)

What has driven performance in 3QFY15?
  • It was a good all round performance by the company as most of its business did well during the quarter, especially on the domestic front. Domestic inorganic chemicals business grew by 7% YoY during the quarter on the back of stable demand and better realizations. However, on a consolidated basis, the revenues were down 5% YoY.

  • Fertiliser segment, the other key segment of the company managed to grow by nearly 15% during the quarter. However, from a margin perspective, the segment continued to face headwinds as PBIT was down 45% on a YoY basis.

  • The PBIT for the soda ash business on the other hand jumped up admirably, coming in higher by 205% YoY

  • The consumer products business continues to grow consistently, logging in impressive growth of 46% YoY during the quarter

    Consolidated segmental break up...
    Segment 3QFY14 3QFY15 Change 9mFY14 9mFY15 Change
    Inorganic Chemicals
    Revenues 21,767 20,609 -5.3% 60,482 60,770 0.5%
    PBIT 1,306 3,985 205.2% 7,808 10,287 31.8%
    PBIT margin 6.0% 19.3%   12.9% 16.9%  
    Fertilisers
    Revenues 18,758 21,470 14.5% 43,521 53,110 22.0%
    PBIT 1,613 885 -45.1% 3,176 3,379 6.4%
    PBIT margin 8.6% 4.1%   7.3% 6.4%  
    Other agri inputs
    Revenues 4,768 4,768 0.0% 16,632 17,847 7.3%
    PBIT  642 525 -18.2% 2,212 2,354 6.4%
    PBIT margin 13.5% 11.0%   13.3% 13.2%  
    Others
    Revenues  525 766 46.0% 1,246 2,104 68.9%
    PBIT (179)  (249) 39.1% (416) (535) 28.4%
    PBIT margin -34.0% -32.4%   -33.4% -25.4%  

  • Consolidated operating profits grew by 17% YoY during the quarter as barring purchase of traded goods all the other cost heads grew at a lower rate than the sales.

  • PBT of the company came in higher by 61% YoY as besides higher operating profits, interest costs and higher other income also impacted profits positively.

  • At the bottomline level, profitability improved further with the company's bottomline remaining in the positive as opposed to a loss during same quarter last year. Significantly lower extraordinary charges were responsible for the same.
What to expect?
At the current price of Rs 471, the stock trades pretty close to our expected FY17 sum of the parts value of Rs 480 per share or thereabouts. The expected stability of the inorganic chemicals business augurs well for the medium term outlook of the company. This combined with the robustness of the agri business and the continued stability of the fertilisers business enables us to remain positive on the long term prospects of the business. However, with valuations having run up, we would advise investors to keep holding on to the stock until we come up with a different view.

We would like to gently remind you that your allocation to equities should be decided upon after keeping aside some safe cash. Also, within your overall exposure to equities, please ensure that you broadly follow our suggested asset allocation and that no single mid cap stock comprises more than 3-4% of your portfolio.`

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