Get documents about "Tata Chemicals - Sunidhi
Document Sample
Tata Chemicals Ltd
Near term headwinds are adequately priced in, Upgrade to ‘Buy’
Fertilisers & Chemicals May 31, 2012
Sector Outlook - Cautious Tata Chemicals reported Q4FY12 results. Topline and EBIDTA numbers were in line
with estimates. Sales at `34650 mn was up by 30%, while EBIDTA went up by 11%
Tata Chemicals CAGR growth (FY12 - FY14E)
10.0% 9.5% YoY. EBIDTA margin improved to 15.9% from last quarter’s low of 14.6%.
Result Update
9.0%
8.0%
Exceptional items include notional forex loss of `246.9 million, impairment of
7.0% 6.3% assets at `259.3 million.
6.0% 5.6%
4.8%
5.0% One-off in Fertiliser segment hits profitability, Bio-fuels assets written down
4.0%
3.0%
during FY12
2.0% TCL has taken `340 mn write down on its Bio-fuels assets (part of Exceptional
1.0%
0.0%
items reporting under head – Impairment of Assets) and has existed first
Sales Growth EBIDTA Growth PBT Growth PAT Growth generation bio-fuels segment. `150 mn of this was taken in Q3FY12 and `190 mn
was booked in Q4FY12. In Fertiliser segment, during Q4FY12, `230 mn losses were
one-off items which reduced profitability. Out of this, `190 mn loss was booked
Recommendation BUY
during Q4FY12 on account of old Ammonia converter, while `40 mn loss was
CMP (`) 317 booked for Power.
Price Target (`) 390
Focus on low capex, higher revenue generating businesses (except Urea)
Upside (%) 23 Management indicated its focus on businesses where capex requirement is low for
52 Week H / L ` 390/288 generating incremental revenues except for Urea plants at Babrala and Gabon.
BSE 30 16312 TCL has received environmental clearances for Babrala brownfield expansion and
will go ahead with project only after Urea Investment Policy is in place post CCEA
approval.
Key Data
No.of Shares, Mn. 255 Challenges in fertiliser sector continue
There is pressure on phosphatic and potassic fertilizers due to INR depreciation
Mcap, ` mn 80756
and subsidy reduction under NBS policy for FY13 compared to FY12. Phosphoric
Mcap,USD Mn @ `50 1648 acid negotiations went through a rough weather with OCP not agreeing to
2 W Avg Qty, (BSE+NSE) Mn 0.2 contract at lower rates while other suppliers such as Phoschem, Foskot and ICS
with Indian industry (not TCL) agreeing at $840 – 850 levels. OCP has finally agreed
Share holding, March'12 to $885 per tonne after ½ of the quarter was over. During Q1FY13, IMACID would
be operational for only about ½ of the quarter while DAP/NPK plant at Haldia will
Promoters 31.1
operational only for 15 days as it will start receiving acid from Mid-June.
FII 13.4
Urea quantities linked to IPP may be lower in FY13 compared to FY12
DII 31.1 th st
Ammonia plant was shut from 30 march to 1 May for replacement of converter.
Public & Others 24.4 This will lead to urea volumes being lower than FY12 levels. In FY12, TCL achieved
volumes of 1.14 mn while we are building in 1.12 mn for FY13. In a normal year,
Performance 1M 3M 6M 12 M TCL has potential to achieve production of 1.25 mn tonnes.
Stock Return % -5.8 -12.6 -8.4 -15.0
Price target maintained at `390, Upgrade to ‘Buy’
Relative Return % -0.1 -4.5 -10.9 -5.5 We like TCL for its initiatives to ensure raw material availability at lower cost
10.0% through backward integration. In long run, these will prove to be sustainable
5.0% structural advantages vis-à-vis its peers. Near term remains challenging with
0.0% several headwinds. At cmp of `317, TCL is trading at P/E of 8.9x and 8.0x for FY13E
-5.0% and FY14E EPS. We maintain target price at `390 based on 11x on FY13E. We
-10.0% believe that near term concerns are adequately priced in and upgrade TCL from
-15.0% ‘Hold’ to ‘Buy’ after correction of over 12% in last 3 months in stock price.
-20.0%
-25.0%
Financials Revenues EBIDTA Adj. PAT Adj. EPS P/E EV/EBIDTA ROAE
Dec-11
Dec-11
Aug-11
Aug-11
Oct-11
Oct-11
Apr-12
Apr-12
Nov-11
Jan-12
Sep-11
Feb-12
Feb-12
May-11
May-12
Jun-11
Jul-11
Mar-12
`mn `mn `mn ` x x %
Tata Chemicals NIFTY
FY10 94484.9 17421.4 8393.0 34.5 9.2 6.8 17.7
Tarun Surana FY11 108946.2 16979.8 6903.3 27.1 11.2 7.3 13.6
tarun.s@sunidhi.com FY12E 138060.6 23036.6 9899.5 38.8 8.2 5.5 16.7
Phone: +91-022-66318632 FY13E 140696.5 23519.1 9049.7 35.5 8.9 5.8 13.5
FY14E 156029.1 25689.7 10037.9 39.4 8.0 5.4 13.8
Source: Company, Sunidhi Research
Tata Chemicals Ltd
EPM declares Potash reserve estimates
EPM Mining Ventures Inc. announced the receipt of a National Instrument 43-101
Mineral Resource Estimate for its Sevier Lake property in Utah. The Estimate was
prepared by Norwest Corporation ("Norwest") and is effective as of May 1, 2012. The
Estimate indicates that the in-situ brines in the Sevier Lake contain the mineral
equivalent of approximately 29.5 million tonnes of measured plus indicated potash
resource, and approximately 9 million tonnes of inferred potash resource; all as
K2SO4 equivalent.
Fertiliser Volume – Quarterly trend
TCL was cautious on fertiliser segment and stayed away from competition where
most other industry peers pushed volumes to distribution channel aggressively. TCL
will wait for inventory glut to clear before entering DAP/NPK market in aggressive
manner. We learn that TCL has contracted few shipments in last few months for
deliveries in ongoing Kharif season.
Fertiliser Volume – Quarterly trend Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12
Urea 265758 240125 332307 302662 285457 278680 320204 253690
DAP Imported 44870 129445 88774 13891 36337 99948 66833 81656
DAP Indigenous 71932 66524 34585 33248 55478 92983 63043 60229
MOP 56725 37643 92869 29617 12939 0 76742 70744
Complex Fertilisers (Imported) 0 0 0 0 0 0 0 0
Complex Fertilisers (Manufactured) 63698 101626 99332 92140 84243 77128 120034 35630
SSP 24621 42163 40392 35125 25791 31557 21390 43951
Complex + DAP 180500 297595 222691 139279 176058 270059 249910 177515
Total Decontrolled Volumes 261846 377401 355952 204021 214788 301616 348042 292210
Total Volumes 527604 617526 688259 506683 500245 580296 668246 545900
Source: DoF, Sunidhi Research
Fertiliser Volume – Annual trend FY08 FY09 FY10 FY11 FY12
Urea 1043457 1067194 1222798 1140852 1138031
DAP Imported 817 160574 66298 276980 284774
DAP Indigenous 225562 181930 187003 206289 271733
MOP 152155 231859 190172 216854 160425
Complex Fertilisers (Imported) 0 0 0 0 0
Complex Fertilisers (Manufactured) 451418 394945 423783 356796 317035
SSP NA NA NA 142301 122689
Complex + DAP 677797 737449 677084 840065 873542
Total Decontrolled Volumes 829952 969308 867256 1199220 1156656
Total Volumes 1873409 2036502 2090054 2340072 2294687
Source: DoF, Sunidhi Research
Sunidhi Research | 2
Tata Chemicals Ltd
TATA Chemicals - Consolidated, INR mn Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 YoY QoQ
Sales from operations 26,731 29,745 36,084 38,541 34573.2 29.3% -10.3%
Less: excise duty 501 508 685 602 596.5 19.0% -0.9%
Net sales 26,230 29,237 35,398 37,939 33976.7 29.5% -10.4%
Other operating income 347 303 311 159 673.6 94.0% 322.6%
Total operating revenue 26,578 29,540 35,710 38,099 34650.3 30.4% -9.1%
EBITDA 4,864 5,268 6,740 5,558 5,408 11.2% -2.7%
Depreciation 1,210 1,249 1,250 1,228 1359.5 12.3% 10.7%
EBIT 3,653 4,019 5,490 4,330 4048.9 10.8% -6.5%
Interest 829 935 1,016 1,111 1207.9 45.7% 8.7%
Other income 67 179 818 454 290.5 334.9% -36.0%
Forex (gain)/loss (95) 54 473 70 246.9 -359.3% 251.7%
PBT 2,986 3,208 4,819 3,602 2,885 -3.4% -19.9%
Tax 634 635 1,357 645 802.8 26.6% 24.5%
Minority 525 562 698 300 434.6 -17.2% 45.1%
Share of profit and loss of asso (22) (2.8) -87.2%
Recurring PAT 1,827 2,012 2,764 2,636 1644.4 -10.0% -37.6%
Exceptionals 369 13 10 398 259.3 -29.7% -34.8%
Reported PAT 1,458 1,999 2,754 2,238 1385.1 -5.0% -38.1%
EPS ` Qtr 5.7 7.8 10.8 8.8 5.4 -5.0% -38.1%
Margins Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 YoY QoQ
EBITDA 18.5% 18.0% 19.0% 14.6% 15.9% -- --
EBIT 13.9% 13.7% 15.5% 11.4% 11.9% -- --
Recurring PAT 7.0% 6.9% 7.8% 6.9% 4.8% -- --
Effective tax rates 21.2% 19.8% 28.2% 17.9% 27.8% -- --
Segment revenue Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 YoY QoQ
Inorganic chemicals 14,683 15,185 16,382 16,670 17768.4 21.0% 6.6%
Fertilizers 8,005 10,469 14,160 17,287 13771.1 72.0% -20.3%
Other agri inputs 2,012 3,654 4,935 4,168 2376.9 18.1% -43.0%
Others 381 149 202 176 232.2 -39.0% 32.1%
Less: inter segment 159 221 281 361 171.9 8.5% -52.4%
Total 24,922 29,237 35,398 37,939 33,977 36.3% -10.4%
EBIT ` million Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 YoY QoQ
Inorganic chemicals 2,520 3,110 3,511 2,609 3198.5 26.9% 22.6%
Fertilizers 928 894 1,543 1,672 1004.4 8.3% -39.9%
Other agri inputs 291 454 945 230 103.6 -64.4% -55.0%
Others (181) 132 170 254 -468.1 158.6% -284.1%
Less: Interest 829 935 1,016 1,111 1207.9 45.7% 8.7%
Less: Net unallocable expenditure 113 197 4 (59) 4.8 -95.7% -108.2%
Total 2,978 3,195 4,810 3,204 3,562 19.6% 11.2%
EBIT- Margins Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12
Inorganic chemicals 17.2 20.5 21.4 15.6 18.0
Fertilizers 11.6 8.5 10.9 9.7 7.3
Other agri inputs 14.5 12.4 19.1 5.5 4.4
Total 12.0 10.9 13.6 8.4 10.5
Capital employed Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12
Inorganic chemicals 78,997 79,057 88,479 94,739 95868.1
Fertilizers 14,439 12,541 10,863 10,001 17237.2
Other agri inputs 8,449 9,959 10,706 10,352 10026.8
Others 1,387 1,648 1,545 1257.1
Unallocated (44,634) (42,361) (44,152) (43,472) -55728.4
Total 57,252 60,582 67,543 73,165 68,661
Source: Company, Sunidhi Research
Sunidhi Research | 3
Tata Chemicals Ltd
Valuations Summary Balance Sheet (` mn)
Year End-March FY10 FY11 FY12E FY13E FY14E Year End-March FY10 FY11 FY12E FY13E FY14E
Per share (`) Sources of Funds
Adj. EPS 34.5 27.1 38.8 35.5 39.4 Equity Share Capital 2433 2548 2548 2548 2548
CEPS 52.9 44.8 58.8 57.9 63.7 Reserves & Surplus 44730 51969 61632 66951 73059
BVPS 193.8 213.9 251.9 272.7 296.7 Net Worth 47164 54517 64180 69499 75608
DPS 9.0 10.0 10.0 10.5 11.0 Loan Funds 49937 56997 63113 65113 67113
Payout (%) 42 46 36 35 33 Deferred Tax Liability 3682 4109 4156 6316 8686
Valuation (x) Capital Employed 100783 115623 131448 140928 151406
P/E 9.2 11.7 8.2 8.9 8.0 Application of Funds
P/BV 1.6 1.5 1.3 1.2 1.1 Gross Block 74722 87282 103992 113992 123992
EV/EBITDA 6.8 7.3 5.5 5.8 5.4 Less: Depreciation 41597 49468 54555 60255 66454
Dividend Yield (%) 2.8 3.2 3.2 3.3 3.5 Net Block 33125 37814 49436 53737 57537
Return ratio (%) Goodwill 53247 56324 63587 63587 63587
EBIDTA Margin 18.4 15.6 16.7 16.7 16.5 WIP 5184 7091 0 5000 10000
PAT Margin 10.1 8.1 8.6 8.0 8.0 Net Fixed Assets 38310 44905 49436 58737 67537
ROAE 17.7 13.6 16.7 13.5 13.8 Investments 5577 4479 6097 6097 6097
ROACE 16.6 14.1 16.9 14.2 14.4 Current Assets
Leverage Ratios (x) 19960 21237
Total D/E 1.1 1.0 1.0 0.9 0.9 Inventory 9587 11456 18632 17346 19236
Net Debt/Equity 0.8 0.8 0.7 0.8 0.8 Cash 11588 13450 16780 9173 9250
Interest Coverage 4.0 4.3 4.6 4.6 4.9 Others 5373 7819 12191 11564 12824
Current ratio 1.1 1.3 1.2 1.3 1.3 Current Liabilities
Growth Ratios (%) Creditors 21021 23263 42943 28910 32061
Income growth -25 15 27 2 11 Provisions 13068 13201 15439 15939 16439
EBITDA growth -1 -3 36 2 9 Net Current Asset 3571 9915 12328 12507 14185
Forex Translation
PAT growth -2 -18 43 -9 11 Reserve 79 0 0 0 0
Turnover Ratios Misc Expenses 0 0 0 0 0
F.A Turnover x 1.3 1.2 1.3 1.2 1.3 Total 100783 115623 131448 140928 151406
Inventory Days 43.0 35.3 39.8 46.7 42.8 Cash flow Statement
Debtors Days 53.1 41.5 48.6 55.0 47.5 Year End-March FY10 FY11 FY12E FY13E FY14E
Payable days 88.2 74.2 87.5 93.2 71.3 PBT 9329 11210 15358 15287 16878
Income Statement(` mn) Depreciation 4226 4468 4511 5018 6016
Year End-March FY10 FY11 FY12E FY13E FY14E Interest Exp 3932 3508 4270 4232 4362
Revenues 94485 108946 138061 140697 156029 Others 1471 -1078 -8108 -600 -650
Op. Expenses 77064 91966 115024 117177 130339 CF before W.cap 19200 18150 16607 24619 26790
EBITDA 17421 16980 23037 23519 25690 Inc/dec in W.cap 3522 -4286 917 -7787 -1600
Other Income 2641 2617 1678 1700 1750 Op CF after W.cap 22722 13865 17524 16832 25189
Depreciation 4468 4511 5087 5700 6200 Less Taxes -2877 -4271 -3439 -4077 -4471
Net CF From
EBIT 15595 15087 19628 19520 21240 Operations 19844 9594 14084 12755 20719
Inc/(dec) in F.A +
Interest 3932 3508 4270 4232 4362 CWIP -5885 -5932 -9619 -15000 -15000
(Pur)/sale of
PBT 11663 11578 15358 15287 16878 Investments 5299 1270 0 0 0
Tax 2093 2749 3439 4077 4471 others -3790 -7371 0 0 0
CF from Invst
PAT 9570 8829 11919 11210 12407 Activities -4377 -12033 -9619 -15000 -15000
Minority 1311 1926 1995 2161 2369 Loan Raised/(repaid) -10382 3894 1845 -2232 -2362
Sh. of Associates 135 0 -25 0 0 Equity Raised 0 3634 0 0 0
Ex. ordinary -2334 -369 -1524 0 0 Dividend -3645 -3918 -2981 -3130 -3280
Reported Pat 6059 6535 8376 9050 10038 CF from Fin Activities -14027 3610 -1136 -5363 -5642
Source: Company, Sunidhi Research Net inc /(dec) in cash 2513 1441 1172 -439 1741
Op. bal of cash 10148 12278 13450 16780 9173
Cl. balance of cash 11589 13450 16780 9173 9250
Sunidhi Research | 4
Tata Chemicals Ltd
Sunidhi’s Rating Rationale
The price target for a large cap stock represents the value the analyst expects the stock to reach over next 12 months. For a stock to be
classified as Outperform, the expected return must exceed the local risk free return by at least 5% over the next 12 months. For a stock
to be classified as Underperform, the stock return must be below the local risk free return by at least 5% over the next 12 months.
Stocks between these bands are classified as Neutral.
(For Mid & Small cap stocks from 12 months perspective)
BUY Absolute Return >20%
ACCUMULATE Absolute Return Between 10-20%
HOLD Absolute Return Between 0-10%
REDUCE Absolute Return 0 To Negative 10%
SELL Absolute Return > Negative 10%
Apart from Absolute returns our rating for a stock would also include subjective factors like macro environment, outlook of the industry
in which the company is operating, growth expectations from the company vis a vis its peers, scope for P/E re-rating/de-rating for the
broader market and the company in specific.
SUNIDHI SECURITIES & FINANCE LTD
Member: National Stock Exchange (Capital, F&O & Debt Market) & The Stock Exchange, Mumbai
SEBI Registration Numbers: NSE: INB 230676436 BSE: INB 010676436
Maker Chamber IV, 14th Floor, Nariman Point, Mumbai: 400 021
Tel: (+91-22) 6636 9669 Fax: (+91-22) 6631 8637 Web-site: http://www.sunidhi.com
Disclaimer: "This Report is published by Sunidhi Securities & Finance Ltd.("Sunidhi") for private circulation. This report is meant for
informational purposes and is not be construed as a solicitation or an offer to buy or sell any securities or related financial instruments.
While utmost care has been taken in preparing this report, we claim no responsibility for its accuracy. Recipients should not regard the
report as a substitute for the exercise of their own judgment. Any opinions expressed in this report are subject to change without any notice
and this report is not under any obligation to update or keep current the information contained herein. Past performance is not necessarily
indicative of future results. This Report accepts no liability whatsoever for any loss or damage of any kind arising out of the use of all or
any part of this report. Sunidhi and its associated companies, directors, officers and employees may from time to time have a long or short
position in the securities mentioned and may sell or buy such securities, or act upon information contained herein prior to the publication
thereof. Sunidhi may also provide other financial services to the companies mentioned in this report."
Sunidhi Research | 5
