TATACHEM - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 19 Sept 25, 2:16 pm

Fundamental Rating: 3.1

📊 Core Financials Overview

Profitability

ROE of 2.81% and ROCE of 3.67% are weak, indicating poor capital efficiency.

EPS of ₹23.3 and a P/E of 43.8 suggest the stock is significantly overvalued relative to its earnings, especially compared to the industry PE of 21.9.

PAT improved from ₹97 Cr to ₹307 Cr QoQ, but the overall margin profile remains thin.

Balance Sheet Strength

Debt-to-equity ratio of 0.12 — very low, showing strong financial discipline.

Book Value of ₹714 vs Current Price ₹989 → P/B ratio ~1.38, which is reasonable.

Dividend Yield of 1.11% adds modest income appeal.

Cash Flow & Stability

PEG ratio of −3.59 is distorted due to inconsistent earnings growth.

RSI at 62.0 and MACD positive suggest mild bullish momentum, though volume is below average.

📉 Valuation Metrics

Metric Value Insight

P/E Ratio 43.8 Overvalued vs industry PE of 21.9

P/B Ratio ~1.38 Fairly priced

PEG Ratio −3.59 Not meaningful due to erratic growth

Intrinsic Value ~₹850–₹900 Slightly below current price

Tata Chemicals appears mildly overvalued, especially given its weak return metrics and inconsistent earnings.

🧪 Business Model & Competitive Edge

Sector: Tata Chemicals Ltd operates in basic and specialty chemistry, with global leadership in soda ash, sodium bicarbonate, and salt.

Strengths

Second-largest soda ash producer globally

Diversified operations across North America, Europe, and Asia

Innovations in specialty chemistry (e.g., Tata NQ – nutritional science)

Challenges

Weak ROE/ROCE and declining revenue growth

Analysts have revised EPS expectations downward

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Company struggles to generate sufficient free cash flow to support operations

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Despite its global footprint and brand strength, Tata Chemicals faces margin pressure and valuation concerns.

📌 Entry Zone Recommendation

Suggested Entry Range: ₹850–₹900

Below 50 DMA (₹947) and closer to intrinsic value

RSI suggests waiting for a pullback before entry

🧭 Long-Term Holding Guidance

Hold if Already Invested: Provided you're targeting long-term sector recovery and global exposure.

Avoid Fresh Entry at Current Levels: Wait for valuation to cool or earnings to stabilize.

Watchlist Triggers

EPS recovery and margin expansion

Free cash flow improvement

Institutional accumulation

Tata Chemicals is a legacy industrial player with global relevance, but its current fundamentals call for caution. You can explore more on TopStockResearch’s dashboard or Invest Yadnya’s analysis for deeper insights.

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stockinvest.us

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www.topstockresearch.com

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