TATACHEM - Investment Analysis: Buy Signal or Bull Trap?
Back to ListInvestment Rating: 2.6
| Stock Code | TATACHEM | Market Cap | 18,230 Cr. | Current Price | 718 ₹ | High / Low | 1,027 ₹ |
| Stock P/E | 27.3 | Book Value | 739 ₹ | Dividend Yield | 1.53 % | ROCE | 3.67 % |
| ROE | 2.81 % | Face Value | 10.0 ₹ | DMA 50 | 765 ₹ | DMA 200 | 857 ₹ |
| Chg in FII Hold | -1.47 % | Chg in DII Hold | 0.23 % | PAT Qtr | 85.3 Cr. | PAT Prev Qtr | 178 Cr. |
| RSI | 42.2 | MACD | -11.0 | Volume | 3,93,550 | Avg Vol 1Wk | 4,33,198 |
| Low price | 692 ₹ | High price | 1,027 ₹ | PEG Ratio | -2.24 | Debt to equity | 0.11 |
| 52w Index | 7.62 % | Qtr Profit Var | 18.4 % | EPS | 26.4 ₹ | Industry PE | 18.2 |
📊 Analysis: TATACHEM shows weak long-term fundamentals with ROE at 2.81% and ROCE at 3.67%, both far below compounding benchmarks. The P/E of 27.3 is higher than the industry average of 18.2, suggesting overvaluation relative to peers. The PEG ratio of -2.24 highlights negative growth prospects. Dividend yield of 1.53% provides some passive returns, but profitability remains under pressure. Technicals show weakness with RSI at 42.2 and MACD negative, indicating bearish sentiment. The ideal entry zone lies between 680–710 ₹ for margin of safety. For existing holders, consider a medium-term horizon with partial exit near 750–780 ₹ resistance unless return ratios improve significantly.
✅ Positive
- Market cap of 18,230 Cr. ensures stability in the chemicals sector.
- Dividend yield of 1.53% provides modest passive income.
- Low debt-to-equity ratio (0.11) indicates financial discipline.
- DII holdings increased by 0.23%, showing some domestic investor confidence.
- EPS of 26.4 ₹ provides valuation support.
⚠️ Limitation
- Low ROE (2.81%) and ROCE (3.67%) limit long-term compounding potential.
- High P/E (27.3) compared to industry average (18.2).
- Negative PEG ratio (-2.24) highlights poor growth prospects.
- FII holdings decreased by -1.47%, showing reduced foreign confidence.
📉 Company Negative News
- Sequential decline in quarterly PAT (85.3 Cr. vs 178 Cr.).
- MACD at -11.0 indicates bearish momentum.
- Stock trading at only 7.62% of 52-week index range, reflecting weak sentiment.
📈 Company Positive News
- Quarterly profit variation (+18.4%) shows some operational recovery.
- Domestic institutional investors marginally increased stake.
- Strong book value of 739 ₹ provides balance sheet support.
🏭 Industry
- Chemicals sector benefits from demand in agriculture, industrial, and specialty applications.
- Industry P/E at 18.2 suggests TATACHEM trades at a premium.
- Structural drivers: global chemical demand, specialty product diversification, and sustainability initiatives.
🔎 Conclusion
TATACHEM earns a rating of 2.6 due to weak ROE/ROCE, expensive valuations, and negative growth prospects despite modest dividend yield. Long-term investors should only consider entry in the 680–710 ₹ zone for margin of safety. Current holders may adopt a medium-term horizon, with partial profit booking near 750–780 ₹ resistance unless profitability improves. The stock remains a cyclical chemicals play rather than a strong long-term compounding candidate.