Tata Chemicals (TCL) operates the largest and most integrated inorganic chemicals complex in India at Mithapur in Gujarat. It is among the largest producers of synthetic soda ash in the world. The company’s state-of-the-art fertiliser complex at Babrala in Uttar Pradesh has a remarkable record in energy efficiency. The phosphatic fertiliser complex at Haldia in West Bengal is currently the only manufacturing unit for diammonium phosphates/ nitrogen-phosphorus-potassium (DAP/NPK) complexes in West Bengal. The Haldia plant has production volumes exceeding 1.2 million tonnes per annum. The fertilisers, sold under the brand name, Paras, leads the market in West Bengal, Bihar and Jharkhand. TCL continues to enjoy leadership position in the salt market in India, with a total market share of 53.1%.
Improved market condition for soda ash in Europe and other Western markets, the improving macro scenario for the fertiliser sector, and the enhanced performance by the overseas subsidiary helped TCL to post a consolidated topline growth of 94% to Rs 2192.35 crore in the quarter ended June 2008 over the June 2007 quarter. Consolidated performance includes the numbers of its overseas subsidiaries as well as for the first time the numbers of General Chemicals Industrial Products Inc. (GCIP), US, which was acquired recently. GCIP’s natural soda ash plant is helping TCL to sustain its margin from rising energy and raw material prices.
The profit before tax (PBT) before extraordinary items (EO) increased 110% to Rs 351.64 crore. Provision of Rs 128.87 crore was made in the June 2008 quarter due to unrealised exchange loss or marked-to-market restatement (under AS-11) of foreign currency borrowing including ECBs raised to fund the purchase of GCIP. Thus, PBT after EO grew just 13% to
Rs 222.77 crore.
Going forward, soda ash prices are expected to remain firm over the medium term on demand from emerging economies in Latin America, the Middle East and parts of Asia. With TCL’s soda ash plants spread across four continents and contributing to about 20% of its international trade, TCL is best positioned to leverage the demand/supply gap in the key consumption regions.
TCL has a unique asset mix in the fertiliser segment with a presence in both urea and nitro-phosphates, mainly DAP. The company is going to be a beneficiary of the recent favorable Indian regulatory reforms that allow companies realisations partly aligned with international prices. TCL’s planned urea capacity expansion of about 20% at its Babrala plant is currently underway. Its overall margin is expected to improve in the year ending March 2009 (FY 2009) and FY 2010 once this new capacity, that could earn substantially better margin, comes on board. TCL has the requisite balance sheet strength to undertake further expansionary projects to leverage any tight urea supply/demand scenario in the international markets.
DAP is made from phosphoric acid, which can either be imported or manufactured from other raw materials such as rock phosphate and sulphur. Producers which have an assured supply of raw materials will be able to maintain optimal capacity utilisation. TCL primarily obtains phosphoric acid for its 670,000-tonne per annum nitro-phosphate plant in Haldia from its joint venture with OCP Group and Chambal Fertilizers. The new DAP policy provides incentives for efficient DAP producers by allowing them to retain 65% of the cost savings that arise from raw materials procurement if the procurement cost is less than 5% of the industry average or US$ 30 per tonne — whichever is lower.
We expect TCL to register consolidated adjusted EPS of Rs 27.3 in FY 2009. The share price trades at Rs 330. P/E works out to 12.
No comments:
Post a Comment