>TATA CHEMICALS (PRABHUDAS LILLADHER)

Tax write-back improved the PAT

■ Q4FY09 Result: Tata Chemicals’ (TCL’s) consolidated net sales have indicated a growth of 29.7% YoY to Rs18.9bn (our expectation was Rs21.2bn) on the back of 29.0% and 30.3% growth in inorganic chemicals and fertilizers segment, respectively. Sales from inorganic chemicals grew due to contribution by General Chemical Industries Products (GCIP, Rs3.2bn). Fertiliser sales increased mainly on account of an increased contribution from urea, which has been partially set-off by the shut down of a phosphatic fertiliser plant for part of the quarter due to fertiliser price volatility. Urea production has shot up to 3.1lac tonnes (up 8% YoY) on account of additional production due to de-bottlenecking of the urea plant.

TCL’s adjusted consolidated PAT grew by 63.4% YoY to Rs1.9bn (against expectation of Rs1.3bn) mainly due to tax refund of Rs465m taken in GCIP and further tax credits taken in other operations. EBIT de-grew by 47.5% to Rs0.7bn due to losses in the fertiliser business due to the shut down of phosphatic fertiliser business and its fallen prices.

■ Outlook: TCL witnessed demand destruction in the soda ash business in H2FY09. Management expects that the soda ash market could recover from the beginning of 2HFY10. Domestic soda ash prices and demand is stable now due to introduction of anti-dumping duty and stable demand from detergent market. Global slowdown in the flat glass demand affected the demand in US and Europe. We have considered a 15% decline in the soda ash price and 12%
volume decline in our FY10E estimates. Urea business is expected to perform well. TCL is planning to shut down their operation of Netherland plant (Soda ash capacity of 3lac tonnes)

■ Valuation: Soda ash business outlook is weakening and also phosphatic fertiliser has not performed well due its fallen prices. Hence, we maintain our ‘Reduce’ rating on the stock.

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