Analysts'Picks: Tata chemicals
Goldman sachs initiates ‘buy’ recommendation on Tata Chemicals with a target price of Rs 435, implying 29% potential upside.
By ET Bureau |
Tata chemicals
RESEARCH: GOLDMAN SACHS
RATING: BUY
CMP: Rs 311
Goldman sachs initiates a ���buy��� recommendation on Tata Chemicals with a target price of Rs 435, implying 29% potential upside. With its soda ash assets spread across geographies serving key consumption regions and an improving regulatory environment in the fertiliser industry, the market has not yet fully factored in Tata Chemicals��� earnings capability.
Goldman Sachs expects 49% EBITDA CAGR over FY08-FY 10E, on the back of earnings accretion from its US soda ash facility and improving margins in the soda ash and fertiliser segments. Tata Chemicals is trading at 4.9x FY10E EV/EBITDA, against its historical trading band of 6-8 x forward EV/EBITDA .
The company���s key catalysts include: 1) Q2 FY09 results, which should provide insight into Tata Chemicals��� soda ash realisations across geographies ; 2) Sustained strength in global urea and di-ammonium phosphate (DAP) prices that lead to improvement in fertiliser margins; and 3) Potential greenfield expansion plans in the urea segment.
RESEARCH: GOLDMAN SACHS
RATING: BUY
CMP: Rs 311
Goldman sachs initiates a ���buy��� recommendation on Tata Chemicals with a target price of Rs 435, implying 29% potential upside. With its soda ash assets spread across geographies serving key consumption regions and an improving regulatory environment in the fertiliser industry, the market has not yet fully factored in Tata Chemicals��� earnings capability.
Goldman Sachs expects 49% EBITDA CAGR over FY08-FY 10E, on the back of earnings accretion from its US soda ash facility and improving margins in the soda ash and fertiliser segments. Tata Chemicals is trading at 4.9x FY10E EV/EBITDA, against its historical trading band of 6-8 x forward EV/EBITDA .
The company���s key catalysts include: 1) Q2 FY09 results, which should provide insight into Tata Chemicals��� soda ash realisations across geographies ; 2) Sustained strength in global urea and di-ammonium phosphate (DAP) prices that lead to improvement in fertiliser margins; and 3) Potential greenfield expansion plans in the urea segment.
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Goldman Sachs��� values Tata Chemicals��� core business using EV/EBITDA methodology and the investments in its group companies at 25% holding company discount to market value. Goldman Sachs values the fertiliser/soda ash/other chemical segments at 6x/5.5x/6x FY10E EV/EBITDA, respectively. The 12-month target price of Rs 435 implies FY10E EV/EBITDA of 6x. Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
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