The stock is undergoing a high base formation in the chemical sector with typical outperformance after witnessing a spectacular rally in CY21. According to brokerage firm ICICI Securities, Tata Chemicals is one such stock.
Brokerage remains positive chemical stock As it is forming a higher base above the 100-days EMA after witnessing a slow movement of retracement, which has acted as strong support on several occasions since April, 2020. Hence, it provides a new entry opportunity with favorable risk reward.
Its buy rating on Tata Chemicals shares is with a target price of 1,085 and stop loss 864 with a time horizon of about three months.
“We believe the platform is poised to accelerate the upward momentum and move slowly 1,085 in the coming months, as this is 80% of the decline from October 2021 to February 2022,” the note said.
The key point to highlight since May 2021 is that, barring one instance, buying demand emerged in the vicinity of an upward sloping trend line on six occasions, highlighting the underlying strength that is driving upward momentum. The move bodes well for the next leg of the move, ICICI Securities highlighted.
Starting operations in 1944, Tata Chemicals has become one of the top five players in the global soda ash market. Under Basic Chemicals, TCL offers Soda Ash, Sodium Bicarbonate, Cement, Salt, Marine Chemicals and Crushed Refined Soda.
“As no new capacity is set to come on stream except for Tata Chemicals, we expect the soda ash market to be largely a supplier’s market due to lack of demand from the flat glass industry. Thus, it can provide momentum towards higher realizations going forward,” the brokerage said.
It expects any moderation in crude oil and power costs to help players like Tata Chemicals improve EBITDA/tonne in a meaningful way. Apart from this, it is also increasing its stake in specialized portfolios like HDS, FOS. Thus, the higher share of the trait in the overall portfolio in the long run, may help it demand better valuations.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.