Over the last five sessions, Tata Chemicals has surged by 33 percent, yet analysts advise against opening new long positions. On March 7, in morning trading, Tata Chemicals shares soared approximately 8 percent, reaching a 52-week peak of Rs 1,271.15, marking the sixth successive session of gains. This upward trend began on March 1, subsequent to the company’s announcement that Fitch Ratings had maintained its Long Term Foreign Currency Issuer Default Rating (IDR) at BB+.
The ratings agency has also adjusted the outlook from “positive” to “stable”. At 9:49 am, Tata Chemicals was trading 7.6 percent higher at Rs 1,269 on the National Stock Exchange (NSE). Over the past five sessions, the stock has surged by 33 percent. Over the past year, Tata Chemicals has seen a 25 percent increase, aligning with the gains in the benchmark Nifty. Analysts noted that the rapid rise in the stock price has increased its attractiveness, attracting attention from investors.
Jigar S Patel of Anand Rathi Shares & Stock Brokers emphasized the necessity of caution, pointing out significant resistance levels around Rs 1,200-1,205. This resistance is primarily identified through the presence of a previous historical high depicted in the chart analysis. Patel advised against initiating fresh long positions at this time. For those already in the market, he suggested considering profit booking and adopting a wait-and-see approach, anticipating a substantial correction in the stock’s price before considering further investment actions.
For the quarter ended December 2023, Tata Chemicals disclosed a 60 percent year-on-year decline in net profit to Rs 158 crore, attributed to sluggish demand across key regions and segments. The revenue of the Tata Group chemical firm also dipped by over 10 percent to Rs 3,730 crore. Despite this, Tata Chemicals maintains its position as the world’s third-largest soda ash producer. Fitch Ratings anticipate the company’s Ebitda (earnings before interest, taxes, depreciation, and amortization) net leverage to average 2.2x over FY25-FY27, aligning with its rating and driving the “stable” outlook, notwithstanding the industry’s near-term pressures.
Fitch Ratings indicated that margins are expected to increase to 17 percent from FY26 onwards, aided by a gradual recovery in demand, supply constraints, and reduced energy costs. However, Fitch also cautioned that prolonged periods of unfavorable economic conditions and industry-wide supply surpluses could restrict margin improvement.
