Shares of Tata Chemicals Ltd. rallied 5.21% on Tuesday, buoyed by a bullish outlook from Morgan Stanley, which upgraded the stock to ‘Overweight' from ‘Underweight' and raised its target price by over 34% to Rs 1,127 from Rs 839.
The global brokerage cited multiple tailwinds for the company, including a recovery in earnings, operational turnaround in overseas units, and easing capital expenditure pressures.
“With an earnings trough now behind us (FY25), we think Tata Chemicals can benefit from higher volumes from expanded capacities in India, turnaround in UK operations, and stronger contribution from Rallis,” Morgan Stanley said in its note.
Morgan Stanley highlighted that Tata Chemicals' UK operations showed signs of a turnaround in the first quarter of FY26, while its India business is expected to benefit from full-scale capacity utilisation.
“Turnaround in UK performance and Kenya operations, full scale-up of India operations, and deriving cost efficiencies are key near-term triggers,” the brokerage noted.
The firm also pointed to a strong performance from Rallis India, Tata Chemicals' agri-input subsidiary, as the global agriculture cycle begins to normalise.
“Rallis delivered a strong beat in Q1FY26, and we expect its contribution to strengthen as the ag-cycle stabilises globally,” it added.
Morgan Stanley believes Tata Chemicals has moved past its peak capital expenditure phase, which should support margin expansion and improve return metrics.
The brokerage also observed that China's soda ash prices are near cycle troughs, which could provide price stability in the near term, especially as global capacity expansions are being delayed and older facilities are being rationalised.
Despite being down 11% year-to-date, Tata Chemicals has outperformed the Nifty over the past three months, reflecting improving earnings momentum, the note said.
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