Tata Chemicals - Rich Valuations A Key Concern: Nirmal Bang
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Nirmal Bang Report
Tata Chemicals Ltd. stock is expected to witness 31.3% downside from current market price post the 63.9%/252% rally in the last three months/12 months.
The stock trades at rich price-to-earning of 38.9 times/22.1 times on FY22E/FY23E earnings per share, which prices in the improving fundamentals over FY21E-23E approximately our FY23E Ebitda is the highest in 15 years.
The stock’s valuation looks stretched as it implies a 143%/35% premium to the five-year median/SD+1 readings on 12-month rolling PE of 9.1 times/16.4 times versus earnings per share compound annual growth rate of 5.4% over FY20-FY23E, which is more relevant than the 43.3% CAGR on the beaten down FY21E as base.
This premium is likely due to bullish expectations on electric vehicle battery business pending clarity and chemical earnings.
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