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Motilal Oswal Gives ‘Subscribe’ Rating To Tatva Chintan Pharma IPO

Tatva Chintan is a leading manufacturer of SDA and PTC globally:

Tatva Chintan is a number one producer of SDA and PTC globally:

TCPCL is the biggest and the one producer of SDAs (40% of income) for Zeolites in India whereas it’s the 2nd largest globally. In case of PTC (27%), it’s the largest producer in India and one of many international leaders. The SDA and PTC merchandise have varied purposes in inexperienced chemistry, which is gaining prominence contemplating the rising deal with inexperienced and sustainable applied sciences. TCPCL derives ~71% of its income from exports the place a number of alternatives are rising.

Robust expansion plans to capitalize on the industry growth prospects:

Sturdy enlargement plans to capitalize on the business development prospects:

Indian specialty chemical market is predicted to develop at 11.3% CAGR over CY19-24E (F&S report) vs 5.3% globally. Additional India’s chemical export is predicted to develop at 13% CAGR (CY19-24E) vs China’s 7% because of China+1 technique being adopted by majority of the worldwide corporations. TCPCL is effectively positioned to seize this chance with area of interest and diversified product portfolio throughout varied industries. It additional plans to deal with inexperienced chemistry by growing new-age applied sciences, demand for which is predicted to develop at 10.5% CAGR globally, mentioned the report.

 Financials also depict healthy backing:

Financials additionally depict wholesome backing:

“Over FY18-21, TCPCL Income/EBITDA/Adj. PAT grew at a CAGR of 30%/42%/62%, supported by margin enlargement of 499bps to 21.9% and decrease taxes because of tax vacation loved by its Dahej facility. The return ratios are wholesome with FY21 RoE/RoCE at 20.5%/16.8% on put up diluted foundation”.

  Issue Size:

Problem Dimension:

INR 5.0 billion or Rs. 500 crore IPO consists of recent challenge of INR2.3bn and OFS of INR2.7bn (by promoters), which can cut back promoters stake to 79.2% from earlier 100%. The funds might be utilized for enlargement of Dahej plant (INR14.7bn) and for upgradation of R&D facility in Vadodara (INR2.4bn).

 Valuation reasonable in comparison to listed peers, hence 'Subscribe' Rating to the Tatva Chintan IPO issue:

Valuation affordable compared to listed friends, therefore ‘Subscribe’ Ranking to the Tatva Chintan IPO challenge:

“We like TCPCL due its management place, large product portfolio, sturdy consumer relationship and excessive entry obstacles. The corporate is predicted to witness sturdy development for subsequent 2-3 years given its enlargement plans. It’s effectively positioned to faucet alternative within the quick rising specialty chemical house with rising deal with inexperienced chemistry by leveraging its sturdy R&D capabilities. The problem is valued at 45.9x FY21 P/E on put up challenge foundation, which seems affordable in comparison with friends (avg. P/E of 59x), because it enjoys increased earnings development (62% CAGR vs. avg. 38% CAGR for friends over FY18-21). Therefore, we advocate Subscribe”, added the report.

Y/E March FY18 FY19 FY20 FY21
Income 1358 2063 2632 3004
Progress (%) 51.9 27.6 14.1
Adj PAT 123 200 378 523
Progress (%) 62.6 89.1 38.3
EPS (INR) 5.5 9 17 23.6
RoE (%) 20.8 25.1 38.3 20.5
P/E 195.3 120.1 63.5 45.9

Disclaimer:

Disclaimer:

The brokerage inputs are talked about in respect of the Tatva Chintan IPO. Traders ought to take funding on their very own analysis and neither the corporate nor its staff shall be accountable for any losses incurred for any resolution taken on the report above.

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