ICICI Securities bullish on Tata Group chemical stock, sees upside in 3 months
Premium- Tata Chemical shares offer a fresh entry opportunity with favourable risk reward, as per the brokerage
The chemical sector is undergoing a higher base formation with stock specific outperformance after witnessing a stupendous rally in CY21. Tata Chemical is one such stock, as per brokerage firm ICICI Securities.
The brokerage remains constructive on the chemical stock as after witnessing slower pace of retracement it is forming a higher base above 100 days EMA, which has acted as strong support on multiple occasions since April, 2020. Hence, it offers a fresh entry opportunity with favourable risk reward.
It has a Buy rating on Tata Chemical shares with a target price of ₹1,085 and stop loss of ₹864 with time horizon of around three months.
“We believe the stage has been set to accelerate upward momentum and gradually head towards ₹1,085 in coming months as it is the 80% retracement of October 2021 to February 2022 decline," the note stated.
Key point to highlight since May 2021 is that, barring one instance, on six occasions buying demand emerged in the vicinity of upward sloping trend line, highlighting inherent strength that augurs well for the next leg of the up move, ICICI Securities highlighted.
Commencing operations in 1944, Tata Chemicals has become one of the top five players in the global soda ash market. Under basic chemical, TCL offers soda ash, sodium bicarbonate, cement, salt, marine chemicals and crushed refined soda.
“Since no new capacity is lined up to come on stream except Tata chemical’s, we expect the soda ash market to be largely a supplier’s market given that there is tailwind in demand from flat glass industry. Thus, it can provide impetus towards higher realisations, going ahead," the brokerage added.
It expects any softness in crude and power cost to help players like Tata Chemicals to improve EBITDA/tonne meaningfully. Moreover, it is also increasing its share in the specialty portfolio such as HDS, FOS. Thus, higher share of specialty in the overall portfolio over the long run, can help it to demand better valuations.
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The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.