Monday, June 30, 2008

Stock Idea: Tata Chemicals

Tata Chemicals, the Tata Group promoted inorganic chemical and fertiliser major, has posted exuberant results for the year ended 31st March 2008.
On a consolidated basis, though its net sales improved only marginally by 3.67% at Rs.6023.14 crore, the over 4 times rise in other income helped give a fantastic boost to the bottomlines. Other income for the year was at Rs.566.74 crore of which Rs.487.47 crore came in via profit on sale of investment.
The company’s soda ash business performed very well despite floods at Mithapur and operational difficulties at Magadi. Its urea operations performed strongly with production for the year under review at a record high. Erratic availability of phosphoric acid however impacted phosphatic fertiliser operations. Revenues for FY08 from the fertiliser business stood at Rs 2,506 crore. The plants at Babrala recorded its highest urea production this year, despite natural gas supply interruptions
The operating expense of the company for FY08 was at Rs.5048 crore, of this Rs.2060.07 crore was due to raw material costs and Rs.938.73 crore was due to power and fuel costs.
Consequently EBIDTA was up 46% at Rs.1618.58 crore. The company also made an exceptional gain of Rs.76.70 crore on exchange rates and this pushed up the PBT by 57% at Rs.1175.87 crore. The company’s tax outgo was marginally down and this further helped the Pat, which was up by a whopping 90% at Rs.964.40 crore. On an equity of Rs.230.98 crore, it posted an EPS of Rs.43.51.
Tata Chemicals, the second largest manufacturer of soda ash and the third largest producer of sodium bicarbonate in the world, sold over 680,000 tonnes of soda ash during the financial year. Higher input costs, especially those of coal, coke and limestone impacted production. Though at the same time, price increases of soda ash on the back of strong demand, helped mitigate these threats.
Work on debottlenecking of the urea plant at Babrala is progressing on schedule and is expected to be completed by December 2008. It has started the integration process of the acquired US based soda ash business of General Chemical Industrial Products March for $ 1,005 million, from Harbinger Capital Partners. Civil construction at site for the ethanol project at Nanded has commenced and is expected to be commissioned the plant by the end of this year. It has also acquired land in Madurai for setting up a bio diesel pilot plant.
Like all the old generation Tata companies, even here, the promoters stake is very low at 29.15%. Institutions hold 40.91%. Interestingly, Hindustan Unilever holds a 2.36% stake in the company.
A month ago, the stock was quoted at Rs.410, closer to its 52-week high of Rs.440 and today it is quoted at Rs.291, which is closer to its 52-week low of Rs.231. Stay invested and at further decline you can consider long term investment.


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