Newly listed specialty chemical stock could rally over 28% as ICICI Securities sees upside

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Domestic brokerage and research firm ICICI Securities hosted promoters of chemical manufacturer Tatva Chinta Pharma Chem for investors meeting. The management expects growth in SDAs to continue, and opportunities are increasing for emission control beyond transport vehicles, the brokerage highlighted. 

“Tatva Chintan should grow faster from new customer wins, and likely supply to developed market for Euro-7. It has cracked products that are high in purity, and has found application in semi-conductor industry. Super- capacitor batteries are being commercially launched which should drive growth for electrolyte salt,” the note stated.

The brokerage has Buy rating on Tatva Chintan shares with a target price of 3,000 apiece, implying a potential upside of over 28% from current levels. The specialty chemical stock made its market debut in July last year, and is down about 11% in 2022 (YTD) so far.

“PASC will benefit from the knowledge of continuous flow chemistry, and the company is already in the process of commercialising products. It has reiterated its sustainable EBITDA margin guidance of 22-24%, and Dahej plant commissioning by Nov/December 2022,” ICICI Securities added.

For Tatva Chintan, SDAs for auto emission control are around 80% of SDA revenue which majorly comes from large commercial vehicles. In near term, demand for SDAs has been impacted by chip shortage, but the company remains confident of achieving growth on normalisation.

“Tatva Chintan is exploring new product development under continuous flow chemistry, and thereby, increase its addressable market. The criteria for product selection under PASC is 1) the peak opportunity should be at least Rs1bn; 2) at least one step should be continuous flow chemistry; 3) scope for improving efficiency and lowering total cost of product,” the brokerage note stated.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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