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Tata Chemicals an outperformer, target of Rs 140: Karvy

Posted on: March 5th, 2009 and is filed under Brokerage Recommendations.

Karvy Stock Broking has maintained its outperformer rating on Tata Chemicals with a target price of Rs 140 in its March 5, 2009 research report. “Tata Chemicals is expected to sign an agreement to buy natural gas from Reliance Industries for its 1.15 million tonne urea plant in Uttar Pradesh. The Gas Sales and Purchase Agreement (GSPA) is expected to be signed on 6 March 2009 to get Reliance’s eastern offshore (Krishna-Godavari) KG-D6 gas.”

“The consolidated net sales and net profit of Tata Chemicals is expected to grow at CAGR of 48.5% and 14% during FY08-10. At the current market price of Rs 113 the stock is trading at 4.8x FY09E and 4.4x FY10E expected earnings. On account of volatility in commodity prices, risk associated with foreign borrowings and general market condition, we have revised our PE valuation from 7x10E to 5.5x10E earnings. Consequently, we have reduced our target price from Rs 179 to Rs 140 and maintain our Outperformer rating on stock,” says Karvy’s research report.

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