Higher soda ash prices, play on EV theme send Tata Chemicals' stock flying in 1 year

Tata Chemicals shares zoom nearly 10%; hits 52-week high after Q1FY22 earnings 

A 30-50 percent rally in prices of soda ash, on a year-on-year basis, has boosted the prospects of Tata Chemicals, said Purvesh Shelatkar, Head of Institutional Broking, Monarch Networth Capital.

A major chunk of the company’s revenue comes through the sale of basic chemistry products which includes soda ash.

In the quarter ended June, the basic chemistry products segment constituted 73 percent of Tata Chemicals’ total revenue on a consolidated level.

The chemical company has an installed capacity of 9,17,000 tonne per annum of soda ash in Gujarat, and 2,450,000 tonne per annum in the US.

Tata Chemicals is reportedly among the top market players in the worldwide Soda Ash market.

India volumes have been steady and above pre-COVID levels, while US export volumes continue to witness a strong recovery. Meanwhile, UK volumes were also largely steady and Kenya continues to register higher volumes, Tata Chemicals had said in their latest investor presentation.

“The recent rally in the share price can be attributed to the surge in soda ash prices and good demand visibility from soda ash user industries,” said Awanish Chandra, Head – Institutional Equities, SMIFS.

Besides, with the electrification theme gaining momentum, several market participants are looking to bet on stocks that are a good play in the electric vehicle space.

The Mumbai-based company also had plans to set up a factory to make lithium-ion cells, as it seeks to capitalise on the emerging electric vehicle industry in India, reports had said in July.

Tata Chemicals also has plans to participate in the fast-emerging prospects of the electric vehicle side. The expected growth from the electrification drive, by setting up a manufacturing unit to produce lithium-ion cells, has also kept the sentiment for the stock buoyant, added Chandra.

Technically, the stock looks good on the chart.

Kkunal Parar, Vice President-Research, Choice Broking said that the stock has the potential to surpass its resistance level of Rs 892 and rally further up to Rs 1,100.

The stock is trading at a premium compared to its average historical valuations.