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Tatva Chintan (Buy) Target: ₹3,110
CMP: ₹2,645.2
Tatva Chintan Pharma Chem’s Q3-FY22 revenue growth was 12 per cent lower than our estimate on higher dip in SDA revenue. Tatva Chintan’s Q3-FY22 revenue grew 31 per cent y-o-y to ₹100 crore and came 12 per cent below our estimate. SDA revenue dipped 30.5 per cent q-o-q to ₹53.30 crore on disruption in auto production from chip shortage, and PASC revenue fell 10 per cent q-o-q to ₹23.4 crore. Electronic chemicals surprised positively with ₹2.2 crore revenue on increasing demand/production of super-capacitor batteries. PTC revenue grew 17.5 per cent q-o-q to ₹24.70 crore on higher capacity availability. However, margin expansion of 130 bps q-o-q despite inferior revenue mix was a positive surprise on better product mix in PTC and PASC. It sees moderate growth even in Q4-FY22, but it is building inventory to service higher demand on normalisation. It has acquired two new large customers in SDA which should help accelerate volume off-take and only one large customer is now left to approve its product. The company is seeing increased orderbook for Q4-FY22 and Q1-FY23. Supercapacitor battery penetration is rising which is helping it drive higher revenues.
We have increased our EPS estimate for FY22/23/24 by 29 per cent/9.4 per cent/6.5 per cent on higher-than-expected margin delivery. Accordingly, we increase our target price to ₹3,110 (from ₹2,920) valuing the company at 40x FY24E EPS.
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