Tatva Chintan Tumbles As Analysts Flag Key Near-Term Concerns After Q1

Here's what brokerages have to say about Tatva Chintan's Q1 FY23 results.

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Shares of Tatva Chintan Pharma Chem Ltd. tumbled the most in over six weeks after analysts listed challenges from chip shortage, geopolitical stress in Europe, lockdown in China, and aggressive diversification into low-margin segments.

Key Highlights (Consolidated, YoY)

  • Net income at Rs 9.80 crore against Rs 23.12 crore

  • Revenue at Rs 88.40 crore against Rs 106.83 crore

  • Ebitda at Rs 15.22 crore against Rs 26.28 crore

  • Ebitda margin at 17.22% against 24.60%

Shares of the Tatva Chintan dropped as much as 9% to Rs 2,160 apiece in intraday trade before closing with 4.45% losses, worst day in six weeks. The trading volume was 15 times the 30-day average, when markets closed.

The stock crossed below the 50-day simple moving average in Tuesday's session, indicating potential downward price momentum.

Of the five analysts tracking the company, four suggest a 'buy' and one recommends a 'hold', according to Bloomberg data. The 12-month consensus price target implies an upside of 17.5%.

ICICI Securities and JM Financial reiterated 'buy' and 'hold' calls, respectively, after the company's first-quarter results. Nirmal Bang maintained 'accumulate'.

Here's what brokerages have to say about Tatva Chintan's Q1 FY23 results.

Nirmal Bang

  • Reiterates 'accumulate' with a target price of Rs 2,650, an implied upside of 11.79%.

  • Higher-than-expected pressure in structure directing agents and forex loss of Rs 5 crore, dragged Ebitda.

  • SDA revenue contribution fell to 7% from 52% YoY as sales were affected due to semiconductor shortage, geopolitical concerns in Europe due to Russia's invasion of Ukraine and extended lockdowns in China due to Covid-19.

  • Expects significant improvement in SDA sales from Q4 FY2022-23.

  • Remains positive on the growth potential in SDA segment.

  • Prices in risk of delay in scale-up and competitive challenges as the company looks to diversify into other segments.

JM Financial

  • Reiterates 'hold', cuts target to Rs 2,400 from Rs 2,530, still an implied upside of 1.24%.

  • Decline in SDA sales and forex loss weighed on Ebitda.

  • SDAs were hurt due to lower offtake from China due to lockdown as well as chip shortages.

  • Expects SDA demand outlook to improve from Q3 FY2022-23 onwards.