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Tata Chemicals a market performer: Karvy

Posted on: May 15th, 2009 and is filed under Brokerage Recommendations.

Karvy Stock Broking has downgraded its rating on Tata Chemicals from outperformer to marketperformer with a target price of Rs 194 in its May 15, 2009 research report.

“We expect net sales of Tata Chemicals (consolidated) for Q4FY09 to decrease by 25% (QoQ) and increase by 80% (YoY) to Rs 26,336 million. The QoQ sales de growth of the company is expected due to decline in sales volume of fertilisers. Sales in Q1 and Q4 are usually lower on account of lower demand of fertilisers. EBITDA margin (QoQ) is expected to surge by 427 basis points from 11.7% in Q3FY09 to 16% in Q4FY09. The expected EBITDA margin expansion would be on account of fall in raw material prices and stock in trade. At the same time, we expect EBITDA margin (YoY) would improve by 385 basis points from 12.2% in Q4FY08 to 16%.

On account of bounce back of commodity prices and better performance expected from fertiliser segment after assured supply of KG-D6 gas, we have revised our PE valuation from 6x10E to 7x10E earnings. Consequently, we have increased our target price from Rs 166 to Rs 194 and downgrade our rating from ‘Outperformer’ to ‘Marketperformer’ rating on stock,” says Karvy Stock Broking’s research report.

source: Moneycontrol

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