Tata Chemicals may gain up to 17% on bourses to hit Rs 500: Analysts

Mumbai: Tata Chemicals, one of the best performing Tata group stocks in the last month, has given a strong breakout outstripping all technical indicators with a huge increase in delivery volumes.Analysts and traders say that the stock is expected to gain more on speculation that it may sell some investments and also get into the business of making lithium-ion cells. Technical analysts expect the stock to test levels of Rs 460 and Rs 500 in the short term.“The stock gave a breakout from its ascending triangle formation on the weekly scale and now till it holds above Rs 385 zone, any decline could be buying opportunity for a further momentum towards Rs 475-500 zone,” said Chandan Taparia, analyst, Motilal Oswal Financial Services. “The stock has seen a surge in delivery volume and open interest activities which supports a bullish stance on the counter.”Vikas Jain, analyst at Reliance Securities, believes that the positive momentum will continue and the stock expects to test Rs 460 levels in the current momentum.The stock which rallied 36 per cent in the last one month ended 5.3 per cent higher at Rs 426 on Wednesday. The stock is currently trading at 0.8 times its book value and 15 times its trailing 12-month earnings, cheapest among its peers. Promoter Tata Sons increased its stake from 28.51 per cent to 29.39 per cent in the September quarter. Tata Chemicals holds a 2.5 per cent stake in Tata Sons, which is valued about Rs 20,000 crore compared to its current market capitalisation of Rs 10,321 crore. Tata Chemicals also owns a 50 per cent stake in Rallis India worth Rs 2,750 crore and 1.56 per cent stake in Titan valued at Rs 1,920 crore. “One of the reasons for the stock rally could be driven by talks of a settlement between the Tata Sons and the Shapoorji Pallonji group and its likely impact on unlocking the value of this 2.5 per cent stake,” said Amit Agarwal, analyst, Nirmal Bang Equities. “Simultaneously, we could also see some clarity on how Tata Chemicals plans to monetise the strategic investments in Tata group companies, including Titan, considered as part of non-current investments in its accounts.”Last month, the management indicated positive cues from all end-user segments for soda ash across regions, except construction, which may take longer to recover. The company expects normal volumes and potential for excess supply to dwindle, suggesting tighter markets and higher soda ash prices. The company also said that such a turnaround along with stable energy costs will support improved margins.
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