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Nirmal Bang Report
Tatva Chintan Pharma Chem Ltd.'s Q1 FY25 came significantly below our expectations on account of pricing pressure due to subdued demand. Impact of significant increase in freight cost due to container availability issues is expected in Q2 FY25.
The management has yet again revised FY25 overall revenue guidance down to ~20%-30% on account lower structure directing agents pricing and slower scale up of the rest of the portfolio due to lack of aggressive restocking by the customers.
The timing of demand recovery seems uncertain.
We believe that the delay in the scale up of ex-SDA portfolio due to demand challenges, China dumping and delay in SDA growth attributable to EU 7 implementation might lead to consensus earnings downgrades over the next two years.
Maintain Sell after rolling forward valuation to June-26E and revised target price of Rs 900 (earlier Rs 1,000). We value Tatva at 22 times price-to-earning.
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