Tata Chemicals hits new high; surges 38% in one month on healthy outlook

An anticipated reduction in imports and the ongoing programs on driving cost reductions and efficiencies will likely yield benefits in margins

Shares of Tata Chemicals hit a new high of Rs 1,182.40 afer they rallied 6 per cent on the BSE in Friday's trade on strong business outlook. The stock of the Tata Group's commodity chemicals company surpassed its previous high of Rs 1,159.95 touched on August 12, 2022.

In the past one month, the market price of Tata Chemicals has appreciated by 38 per cent after the company reported better-than-expected earnings for the quarter ended June 2022 (Q1FY23). In comparison, the S&P BSE Sensex gained 10 per cent during the period.

Tata Chemicals operates through two verticals - Basic Chemistry (Alkali Chemicals-soda ash, sodium bicarb, salt, silica & other halogen chemicals) and Specialty Products (specialty silica, prebiotics & formulations, agrochemicals and seeds).

The company's product portfolio provides key ingredients to many of the world's leading brands for glass, detergents, pharma, food, animal feed and other industries. The company is a global major in soda ash and sodium bicarbonate (market position of 3rd and 6th, respectively) with manufacturing facilities in India, US, UK and Kenya.

The company reported a strong 87 per cent year-on-year (YoY) jump in its consolidated profit after tax (PAT) at Rs 641 crore in the June quarter (Q1FY23). The Tata Group company had posted a PAT of Rs 342 crore in the corresponding quarter of the previous fiscal.

The company's reported income from operations grew 34 per cent YoY at Rs 3,995 crore in Q1FY23 as compared to Rs 2,978 crore in Q1FY22. Earnings before interest, taxes, depreciation, and amortization (ebitda) margins for the quarter rose 520 bps to 25.4 per cent (highest in the history) owing to lower power & fuel and freight cost.

Tata Chemicals said the operating performance reflects improved realisations, efficient cost management and optimum capacity utilization in challenging market conditions, and in the context of rising input and energy costs. The growth in basic chemical was largely led by strong realisations of soda ash across all geographies.

The global demand environment continues to be positive across the company's products and their applications. While this positive momentum is expected to continue in the near to medium term, the input side environment especially energy remain at elevated levels coupled with logistic challenges that continue to be seen in the market, the management said.

"Tata Chemicals is well positioned to continue its growth journey in FY 2022-23. Green Chemistry and Green applications will continue to be at the heart of our growth. Soda Ash is expected to remain on a growth path in India and around the world with increase in demand for solar glass and lithium carbonate. Green Chemistry based specialty Silica and Prebiotics will continue to draw customer franchise. Specialty silica is an essential ingredient for the green labelling of tyres and Fermentation technology-based Prebiotics are replacing synthetic ingredients in food, feed and pharma sectors," the company said in its FY22 annual report.

In India, recovery in soda ash demand across application sectors, an anticipated reduction in imports, and increasing energy and freight costs will necessitate increased focus on operating rates. This, coupled with the ongoing programs on driving cost reductions and efficiencies, will likely yield benefits in margins. The phase I expansion plan under execution and projected phase II expansion in Mithapur will further drive growth across the Company’s product portfolio in its core business, the company said.