Accumulate Tata Chemicals; target Rs 270: P Lilladher

Accumulate Tata Chemicals; 

target Rs 270: P Lilladher

"Tata Chemicals' Q1FY14 results turned out to be lower than expectations. Adjusted PAT came at Rs1.2bn, -24 percent YoY against an estimate of Rs1.6bn due to pressure on margins. Going forward, in the standalone business, while soda ash manufactured volumes are likely to be stable, we expect margins to remain range-bound due to increase in energy and other costs. Management also highlighted that continuous decline in global fertiliser prices will pressurize margins of manufacturers in the near term, while traders will stand to benefit out of it due to shorter turnaround time. On the North American side, margins are likely to remain under pressure due to weak export realizations and increase in costs. We have trimmed our estimates by 15 percent/13 percent to Rs28.0/32.2 to account for near-term margin pressures. Revised target price stands at Rs270 (previous Rs330). We expect stock to remain under pressure in the near-term due to challenging business environment, both in soda ash as well as fertilisers. Accumulate the stock with a target price of Rs 270," says Prabhudas Lilladher research report.

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