MOSL: Morning India (3/April/18)- 1. Tata Chemicals (Initiating Coverage): Flight of rebirth; 2. Motherson Sumi; 3. Financials; 4. Telecom; 5. Economy; 6. Shilpa Medicare; 7. Auto Volumes
MOrning India (3/April/18): 1. Tata Chemicals (Initiating Coverage): Flight of rebirth; 2. Motherson Sumi; 3. Financials; 4. Telecom; 5. Economy; 6. Shilpa Medicare; 7. Auto Volumes
Today’s top research idea
Tata Chemicals (Initiating Coverage): Flight of rebirth; Transforming into a growth company; re-rating imminent
- TTCH is using its cash cows – soda ash and sodium bicarbonate – to build growth businesses such as consumer and specialty products. In the consumer business, it enjoys leadership in the domestic table salts market and is fortifying its pulses and spices portfolios. In the specialty products business, it is developing nanomaterial and nutritional solutions.
- Massive cash generation of INR39.7b via divestment of the urea and phosphatic fertilizers business and sale of investments coupled with steady accruals from the soda ash business would help TTCH repay debt. Its interest outgo is likely to decline from INR4.1b in FY17 to INR2.1b in FY20.
- As TTCH scales up its growth businesses and deleverages its balance sheet, we expect its consolidated RoCE to improve considerably, in turn driving a stock re-rating. We believe it would be fair to assign ~30% premium to its five-year average EV/EBITDA of 7.5x. Our SOTP-based target price of INR940 (implied EV/EBITDA of 9.7x FY20E) implies 36% upside. We initiate coverage with Buy.
Piping hot news
RBI lets banks spread out provisioning for bond market losses over 4 quarters
- The Reserve Bank of India (RBI) on Monday allowed banks to spread out the provisioning to cover losses on their government bond portfolio across four quarters, in a relief for lenders who would have otherwise faced an immediate hit to their bond portfolio due to rising yields. This dispensation to spread the so-called mark-to-market (MTM) provisioning is available for the quarters ending December 2017 and March 2018.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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