Tata Chemicals: In early trade on March 7, Tata Chemicals shares shot up 14% to reach a 52-week high of Rs 1,349 on NSE, extending gains to the sixth session in a row.
Since the company announced on March 1 that Fitch Ratings had reaffirmed its Long Term Foreign Currency Issuer Default Rating (IDR) at BB+, the stock has been rising.
Additionally, the outlook was changed from “positive” to “stable” by the rating agency.
Tata Chemicals was up 7.6% at Rs 1,269 on the National Stock Exchange (NSE) at 9:49 a.m.
Over the last five trading sessions, the stock has increased by 33%. Tata Chemicals has increased by 25% over the last year, matching the gains seen by the benchmark Nifty.
According to analysts, the stock’s appeal has increased due to its quick price gains, attracting the attention of investors.
Jigar S Patel of Anand Rathi Shares & Stock Brokers emphasized the critical need for caution, highlighting the substantial resistance hovering around Rs 1,200-1,205. This resistance is primarily identified through the presence of a previous historical high, as depicted in the chart analysis.
Therefore, initiating new long positions at this point is not advisable, cautioned Patel. For those who are already invested in the market, it would be wise to consider locking in profits and adopting a cautious approach. Anticipating a substantial correction in the stock’s price, it’s prudent to wait and observe before considering any further investment actions.
In the quarter ending December 2023, Tata Chemicals witnessed a significant 60 percent year-on-year decline in net profit, amounting to Rs 158 crore. This dip was attributed to subdued demand across crucial regions and segments. Additionally, the revenue of the Tata Group’s chemical firm saw a decline of over 10 percent, totaling Rs 3,730 crore.
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Tata Chemicals holds the distinction of being the world’s third-largest producer of soda ash. Fitch Ratings anticipates that the company’s EBITDA (earnings before interest, taxes, depreciation, and amortization) net leverage will average 2.2x over the period spanning FY25 to FY27. This projection aligns with the company’s rating, contributing to a “stable” outlook despite prevailing industry challenges in the near term.
Margins will rise to 17 percent by FY26, aided by steady demand recovery, supply tightening, and decreasing energy costs. However, Fitch Ratings warned that a protracted period of unfavorable economic conditions and an industry supply glut may limit margin development.
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