This Tata group stock is trading 16% low from its 52 week high: Should you buy?

Tata Chemicals Ltd is a mid-cap company in the chemical industry with a market capitalization of 24,660 Cr. The company is Asia’s largest saltworks, as well as the world’s third-largest soda ash and sixth-largest sodium bicarbonate maker. Tata Chemicals has two divisions: Basic Chemistry and Specialty Chemistry. Many of the world’s major brands for glass, detergents, medicine, biscuit making, bakeries, and other sectors rely on the company’s Basic Chemistry product line. Performance Materials, Nutrition Sciences, and AgriSciences are the three areas of specialty chemistry products offered by the firm.

The stock had a 52-week high of 1,158.00 on 18-OCT-21 and a 52-week low of 690.30 on 27-MAY-21, implying that it is currently trading 16.46 per cent below its 52-week high at 967.30 per share. Tata Chemicals is trading above its 5-day, 100-day, and 200-day moving averages, but below its 20-day and 50-day moving averages. The stock has been losing over the previous 5 days, dropping 1.08 per cent during that time, but has risen 3.25 per cent in the last month. In the previous six months, the stock has grown by 7.38 per cent, and year to date (YTD) in 2022, it has increased by 5.76 per cent.

The brokerage firm Anand Rathi has said “The company’s strategy is to focus on driving its transformation agenda to grow businesses and products that serve customer needs along the vectors of sustainability and good health. These megatrends would drive demand growth in sectors such as food, feed and pharma and also in sustainability driven applications like solar glass, lithium carbonate, new generation of tyres and a shift from plastic to glass containers. In turn, these would continue to drive the Company’s current and future investments especially in its specialty products portfolio as ingredient supplier of choice to these sectors.”

The brokerage has claimed that “The company is expanding its manufacturing capacity of Soda Ash from 9.17 lakh MT to 11.47 lakh MT, Sodium Bicarbonate manufacturing capacity from 1.05 lakh MT to 1.75 lakh MT and Salt manufacturing capacity from 11.70 lakh MT to 15 lakh MT for a total project cost of 29,000 million of which 12,500 million has already been spent.”

“We believe the company will grow its revenue by 13% CAGR over the next two years – driven by capacity expansion and recovery in economic activities. Also, we believe the company will maintain its profit margin with focus on cost reduction, maximizing plant output and reduction of international debt. The company is trading at 19.6x its FY22 earnings and 17.4x its FY23E earnings. We initiate our coverage on TATACHEM with a BUY rating and a target price of 1,170 per share,” Anand Rathi has said in a note.

The company’s 83rd Annual General Meeting (‘AGM’) will take place on Wednesday, July 6, 2022. The Board of Directors has recommended a dividend of Rs. 12.5 per share, or 125 percent, for the fiscal year 2021-22, subject to shareholder approval at the company’s 83rd Annual General Meeting.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

Subscribe to Mint Newsletters

* Enter a valid email

* Thank you for subscribing to our newsletter.