Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Tata Chem: Fairly valued? - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jul 31, 2002

    Tata Chem: Fairly valued?

    The results posted by Tata Chemicals for 1QFY03 need to be read carefully. The company has reported a 158% rise in profitbality. However, the same is largely on account of lower base last year. In the first quarter of last year, there was a considerable drop in sales and profitability on account of fire at it's Mithapur factory.

    (Rs m) 1QFY02 1QFY03 % change
    Sales 2,914 3,622 24.3%
    Other Income 38 77 104.3%
    Expenditure 2,104 2,536 20.5%
    Operating Profit (EBDIT) 810 1,087 34.2%
    Operating Profit Margin (%) 27.8% 30.0%  
    Interest 314 259 -17.4%
    Depreciation 329 340 3.3%
    Profit before Tax 205 565 175.6%
    Provision and Contigencies      
    Extraordinary Income (36) (35) -2.2%
    Tax 37 189 410.5%
    Profit after Tax/(Loss) 132 340 157.8%
    Net profit margin (%) 4.5% 9.4%  
    No. of Shares (eoy) (m) 180.7 180.7  
    Diluted Earnings per share* 2.9 7.5  
    P/E (at current price)   8.0  

    However, what is encouraging is that the company seems to be on target in its efforts to improve operating performance. It has consistently improved its operating margins in the last three quarters on the back of restructuring and cost cutting excerise. The company seems to be moving fast to become the lowest cost producer of synthetic soda ash globally. The internal initiatives have been coupled with encouraging soda-ash prices thus contributing to robust financial performance. There has been renewed export focus by the company in the soda ash business.

    In the salt business, there has been a 43% rise in volumes with steady progress in initiatives aimed at improving profitability and expanding business. The export market of vacuum salt is lucrative with international salt prices ranging up to US$ 1/kg as compared to US$ 0.2/kg in the domestic market. As part of its strategy, the company has also introduced a new brand in the lower end of the price spectrum. Tata Salt has been a pioneer in the branded edible salt segment with highest market share. However, HLL’s ‘Annapurna’ brand and some new brands like ‘Dandi’ are keeping the company on its toes. After a short slip in market share, the company has regained its market share in the branded salt business.

    In the absence of major expansion plans, the company has robust cash flows every year. Apart from this the company also has Rs 4.3 bn in investments (which is equal to 42% of the company’s current market capitalization). Most of these investments are either liquid or invested in Tata group companies, which could unlock considerable value going forward.

    However, with this substantial amount of money blocked in investments, the company’s RoCE is impacted considerably. The RoCE of the company has dropped from almost 15% in 97-98 to mere 7% (approximately) for FY02. To counter this situation, the company has initiated a major buyback program. Tata Chemicals has allotted Rs 1.3 bn for its buyback program, which would be through the open market route at a maximum price of Rs 60 per share.

    Pending the buyback program of the company, the stock price of Tata Chemicals stock price has remained volatile in the last few days. At the current market price of Rs 60, the stock is trading at 8x its 1QFY03 annualised earnings. The stock looks fairly priced at current valuations. Even our DCF calculations (with 17% discount rate and 0.5% terminal growth rate) suggest that there is not much appreciation in the stock from the current market price.



    Equitymaster requests your view! Post a comment on "Tata Chem: Fairly valued?". Click here!


    More Views on News

    Tata Chemicals: Lower Finance Costs Boost Profits (Quarterly Results Update - Detailed)

    Jun 2, 2017

    Tata Chemicals registers 54.2% YoY rise in net profits during fourth quarter of FY17 on the back of lower finance costs and rise in other income.

    Tata Chemicals: Urea division dampens performance (Quarterly Results Update - Detailed)

    Nov 18, 2016

    Tata Chemicals has reported consolidated topline fall of 17% YoY while the bottomline has fallen 5% YoY

    Tata Chemicals: Operating margins catalyze strong profit growth (Quarterly Results Update - Detailed)

    Aug 18, 2016

    Tata Chemicals has reported consolidated topline fall of 9% YoY while the bottomline has grown 40% YoY.

    Tata Chemicals: Ends the year on a good note (Quarterly Results Update - Detailed)

    Jun 8, 2016

    Tata Chemicals reported consolidated topline growth of 7% YoY while the bottom line stood at Rs 2.4 bn as opposed to a loss during same quarter last year.

    Tata Chemicals: Consolidated profits down substantially (Quarterly Results Update - Detailed)

    Mar 2, 2016

    Tata Chemicals has reported consolidated topline fall of 4% YoY while the bottom line has fallen 45% YoY

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 17, 2017 03:01 PM


    • Track your investment in TATA CHEMICALS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks



    Compare Company With Charts