ICICI Securities remarked that it is bullish on Tatva Chintan Pharma Chem. But Why? What makes Tatva Chintan so promising? Let’s analyze.
Founded in 1996, Gujarat-based Tatva Chintan Pharma Chem is a leading specialty chemicals manufacturing company. The company’s products boasts of highly technical and niche products such as SDAs, PTCs, and electrolyte salts.
From a revenue of 1 billion in 2015, the company soared to report a revenue of Rs. 2 billion in 2020. In the following year, Tatva Chintan (NSE: TATVA | BSE: 543321) went public. With the emission control opportunities rising beyond transport vehicles, the current market scenario hints at a consistent growth in SDAs. It is hard to ignore the vast landscape of opportunities in the semiconductor industry and PASC. Analysts have forecasted a revenue / EPS CAGR of 31% / 28% over FY22-24E.
On the bright side, the company has a good return on equity (ROE) track record: 3 Years ROE 35.52%. There are no significant contingent liabilities in the company.
On the flip side, currently, the stock is trading at 11.55 times its book value. Additionally, the Tax rate seems low and Debtor days have increased from 84.00 to 110.27 days.
For FY21, the company’s profit before tax stood at Rs 60.7 crore. For FY21, around 53.14 percent of the company’s customers had been with the company for more than five years.
The top 10 customers of the company account for around 60 percent of its revenue. The company has a lot of negotiating leverage because of its enormous consumer base.
The three-year average ROE and ROCE stood at 29.8 and 24.5 percent, respectively. The current ROE and ROCE stood at 31.5 and 26.8 percent, respectively, in FY21.
The company’s stock would trade at a P/E of 45.9, which is lower than its peer’s median level of 73.3. The company’s stock would trade at a P/B of 6.1, which is lower than its peer’s median level of 12.7.