soda ash margin expands across rs 627 rs 723 ( october 31...

©

Your success is our success

Emkay

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore SA: SUNIL TIRUMALAI

India Equity Research | Speciality Chemicals

November 1, 2019

Result Update

Tata Chemicals Refer to important disclosures at the end of this report

Soda ash margin expands across geographies; maintain Buy

CMP Target Price

Rs 627 Rs 723 (■) as of (October 31, 2019) 12 months

Rating Upside

BUY (■) 15.3 %

Change in Estimates

EPS Chg FY20E/FY21E (%) -/-

Target Price change (%) NA

Target Period (Months) 12

Previous Reco BUY

Emkay vs Consensus

EPS Estimates

FY20E FY21E

Emkay 45.4 53.8

Consensus 50.3 58.7

Mean Consensus TP (12M) Rs 685

Stock Details

Bloomberg Code TTCH IN

Face Value (Rs) 10

Shares outstanding (mn) 255

52 Week H/L 727 / 543

M Cap (Rs bn/USD bn) 160 / 2.25

Daily Avg Volume (nos.) 6,63,729

Daily Avg Turnover (US$ mn) 5.4

Shareholding Pattern Sep '19

Promoters 30.6%

FIIs 9.4%

DIIs 38.9%

Public and Others 21.1%

Price Performance

(%) 1M 3M 6M 12M

Absolute 6 9 9 (9)

Rel. to Nifty 3 2 7 (20)

Q2FY20 consolidated revenues grew by 4.1% yoy to Rs30.8bn (our est. of Rs32.0bn) and

EBITDA rose by 5.5% yoy to Rs6.3bn (our est. of Rs6.4bn). EBITDA margins expanded

by 26bps yoy to 20.6% (our est. of 20.0%).

Consolidated basic chemicals revenue increased by 1.0% yoy to Rs20.5bn on better soda

ash realizations across geographies. Total soda ash volumes declined 1% yoy due to

lower volume at TCL India and the discontinuation of its trading business in Europe.

We expects short-term pressure on domestic soda ash business will be mitigated by better

performance from subsidiaries. Its Rs24bn capex plan toward Mithapur capacity

expansion remains on track, while the demerger process of its consumer products division

is progressing well.

Strong performance in other geographies was offset by a muted standalone show. Soda ash

volume recovery in the domestic market and sustenance of overseas margins remain the

key trigger for the stock. We maintain our SoTP-based TP of Rs723 (and demerged TP of

Rs472 Link of demerger report) with a Buy rating. We continue to have UW on the EAP.

Relative price chart

Source: Bloomberg This report is solely produced by Emkay Global. The following person(s) are responsible for the production of the recommendation:

Rohit Sinha

[email protected]

+91 22 6612 1306

-30

-22

-14

-6

2

10

550

585

620

655

690

725

Nov-18Dec-18Mar-19 Apr-19 Jun-19 Aug-19 Oct-19

%Rs

Tata Chemicals (LHS) Rel to Nifty (RHS)

Subsidiaries lead the show

Consolidated revenues grew by 4.1% yoy to Rs30.8bn on strong performance by overseas

subsidiaries, partially offset by weak standalone revenue (-6.3% yoy). Overall, basic

chemicals grew (1% yoy), while consumer products (11.7% yoy) and specialty chemicals

(13.7%) supported overall growth. Basic Chemicals segment clocked revenue growth due to

the following subsidiary performance - TCNA (3.3% yoy) and TCML (8.6% yoy). This was

partially offset by a 4.5% yoy decline in TCEL and 6.3% fall in India. Consumer Products

growth was the result of strong salt business coupled with improvement in pulses segment

due to better marketing spend.

Soda ash holds margins

Consolidated EBITDA went up by 5.5% yoy to Rs6.3bn, with a 26bps margin expansion to

20.6%. This was primarily attributed to improved efficiency in soda ash business across

geographies. TCNA/TCEL/TCML subsidiaries saw 118bps /400bps /927bps EBITDA margin

expansion, largely due to lower fuel costs and better realization. However, due to higher

marketing spend and input costs, consumer products and specialty chemicals segments

reported 448bps/409bps yoy contraction in EBIT margins.

Stable soda ash outlook; maintain Buy

Management remains confident on the long-term outlook of soda ash business but with some

short-term pressure. The progress in consumer products and specialty chemicals segments

is satisfactory. Further, the phase-wise capacity expansion in soda-ash and salt will support

FY21E EPS growth. We maintain our SoTP-based TP of Rs723 (and the demerged TP of

Rs472) with a Buy rating. We have UW on our EAP due to demerger process underway. The

key risk to our estimate is a decline in soda-ash volumes.

Please see our sector model portfolio (Emkay Alpha Portfolio): Speciality Chemicals (page 14)

Financial Snapshot (Standalone)

(Rs mn) FY17 FY18 FY19 FY20E FY21E

Revenue 1,03,461 1,02,697 1,12,963 1,22,000 1,34,200

EBITDA 20,943 21,907 20,951 24,286 27,118

EBITDA Margin (%) 20.2 21.3 18.5 19.9 20.2

APAT 9,931 25,046 9,944 12,548 14,707

EPS (Rs) 39.0 52.9 40.8 45.4 53.8

EPS (% chg) 29.4 35.6 (22.9) 11.3 18.7

ROE (%) 13.5 26.4 8.5 9.9 10.8

P/E (x) 16.1 11.9 15.4 13.8 11.6

EV/EBITDA (x) 10.5 8.6 8.8 7.2 6.4

P/BV (x) 2.0 1.4 1.3 1.2 1.1

Source: Company, Emkay Research

http://research.emkayglobal.com/ResearchDownload.aspx?Pid=23vspxaUKWk%3d&Cid=JWghB%2f4Vxgw%3d&fName=kEU%2fAyGQQRxkO3ExtnJyFr90Dfp3Zba3Q8ONbbhZmtJi1bCjAjP3GSlsGIBRoCc6&typ=APSSeVhmQ%2b8%3d

Tata Chemicals (TTCH IN) India Equity Research | Result Update

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

SA: SUNIL TIRUMALAI November 1, 2019 | 2

Story in Charts

Exhibit 1: Conso. revenues (Rs Bn) and EBITDA margin (%)


Exhibit 2: Revenue share


Exhibit 3: Revenue of foreign subsidiaries (Rs Bn)


Exhibit 4: EBITDA of foreign subsidiaries (Rs Bn)


Exhibit 5: EBITDA margin of foreign subsidiaries (%)


Exhibit 6: Soda ash sales volumes (‘000)


Exhibit 7: Consumer products revenue and EBIT margin


Exhibit 8: Specialty chemicals revenue and EBIT margin


24 25 25 27 26 26 27 30 28 28 29 31

21.1%18.8%19.5%

23.7%21.9%

20.1%17.9%

20.3%

16.6%19.2%

20.4%20.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0

5

10

15

20

25

30

35

Q3

FY

17

Q4

FY

17

Q1

FY

18

Q2

FY

18

Q3

FY

18

Q4

FY

18

Q1

FY

19

Q2

FY

19

Q3

FY

19

Q4

FY

19

Q1

FY

20

Q2

FY

20

Consolidated Revenue (Rs Bn) EBITDA Margin (%)

8.8 8.8 8.1 8.3 9.1 9.2 9.9 10.1 10.2 10.6 10.3 10.2

15.5

16.3

16.4

18.6

16.6

16.4

17.6

19.5

18.1

17.0

18.7

20.6

0%10%20%30%40%50%60%70%80%90%

100%

Q3

FY

17

Q4

FY

17

Q1

FY

18

Q2

FY

18

Q3

FY

18

Q4

FY

18

Q1

FY

19

Q2

FY

19

Q3

FY

19

Q4

FY

19

Q1

FY

20

Q2

FY

20

Standalone Revenue (Rs Bn) Subsidiaries Revenue (Rs Bn)

7.0 8.1 8.2 8.3 8.1 7.9 8.0 8.6 7.9 8.2 7.7 8.6

4.3 4

.6

4.1

4.0

4.0

4.1

3.4 3.6

3.8 3.7

3.4 3

.5

1.31.8 1.5 1.6 1.5 1.1 1.1

1.2 1.2 1.40.9

1.3

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Q3

FY

17

Q4

FY

17

Q1

FY

18

Q2

FY

18

Q3

FY

18

Q4

FY

18

Q1

FY

19

Q2

FY

19

Q3

FY

19

Q4

FY

19

Q1

FY

20

Q2

FY

20

US Europe Africa

1.71.2

1.52.2

1.81.4 1.3

1.7 1.72.1 1.9 1.9

0.5

0.8

0.2

0.6

0.6

0.8

0.3

0.3

0.1

0.3

0.2 0.5

0.1

0.1 0.2

0.20.3

0.2

-0.1

0.1 0.3

0.30.2

0.3

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Q3

FY

17

Q4

FY

17

Q1

FY

18

Q2

FY

18

Q3

FY

18

Q4

FY

18

Q1

FY

19

Q2

FY

19

Q3

FY

19

Q4

FY

19

Q1

FY

20

Q2

FY

20

US Europe Africa

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Q3

FY

17

Q4

FY

17

Q1

FY

18

Q2

FY

18

Q3

FY

18

Q4

FY

18

Q1

FY

19

Q2

FY

19

Q3

FY

19

Q4

FY

19

Q1

FY

20

Q2

FY

20

US Europe Africa

168 164 195 174 162 182 175 169 171 172 182 163 154

572

556

543

569

625

562

589

536

555

571

550

541

570

123 123 113 106107

104 7882 83 83 76 68 77

62 68 76 8686

78 8555 72 80 79

63 74

0100200300400500600700800900

1000

Q2

FY

17

Q3

FY

17

Q4

FY

17

Q1

FY

18

Q2

FY

18

Q3

FY

18

Q4

FY

18

Q1

FY

19

Q2

FY

19

Q3

FY

19

Q4

FY

19

Q1

FY

20

Q2

FY

20

India US Europe Africa

3.3 3.8 4.0 4.0 4.4 4.6 4.7 4.8 5.0 5.1

15.8%17.2%

15.2%14.0%

18.8% 18.8%

12.5%

18.0%

14.6% 14.3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Q1

FY

18

Q2

FY

18

Q3

FY

18

Q4

FY

18

Q1

FY

19

Q2

FY

19

Q3

FY

19

Q4

FY

19

Q1

FY

20

Q2

FY

20

Consumer Product (Rs bn) EBIT Margin (%)

4.7 6.0 4.0 3.8 5.8 6.7 4.3 3.5 6.3 7.6

12.1%

17.6%

5.5% 5.4%

11.5%

15.7%

2.2%

-2.7%

11.9% 11.6%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Q1

FY

18

Q2

FY

18

Q3

FY

18

Q4

FY

18

Q1

FY

19

Q2

FY

19

Q3

FY

19

Q4

FY

19

Q1

FY

20

Q2

FY

20

Specialty Chemical (Rs Bn) EBIT Margin (%)




Exhibit 9: Actual vs. Estimates (Q2FY20)

(in Rs mn) Actual Estimate % Variation

Comment (Emkay) Consensus Emkay Consensus

Sales 30835 32001 31441 -3.6 -1.9 Marginally below estimates

EBITDA 6349 6400 6476.0 -0.8 -2.0 In line with estimates

EBITDA margin % 20.6 20.0 20.6 60bps 0bps Marginally ahead of estimates

APAT 3548 3057 3004 16.1 18.1 Ahead of estimates due to deferred tax adjustment


Exhibit 10: Quarterly performance (Standalone)

Rs Mn Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 YoY (%) QoQ (%) H1FY20 H1FY19 YoY %

Revenue 10,136 10,190 10,590 10,314 10,206 0.7 -1.1 20,520 20,028 2.5

CoGS 4,243 4,343 4,513 4,154 4,004 (5.6) (3.6) 8,158 8,283 -1.5

Gross Profit 5,893 5,847 6,077 6,160 6,202 5.2 0.7 12,362 11,745 5.3

as % of sales 58.1 57.4 57.4 59.7 60.8 1.8 60.2 58.6

SG&A expenses 3,332 3,602 3,421 3,492 3,520 5.6 0.8 7,012 6,629 5.8

as % of sales 32.9 35.3 32.3 33.9 34.5 1.9 34.2 33.1

EBITDA 2,562 2,245 2,656 2,668 2,683 4.7 0.6 5,350 5,116 4.6

Depreciation 364 360 376 369 363 (0.3) (1.7) 732 696 5.2

EBIT 2,198 1,885 2,279 2,298 2,320 5.6 0.9 4,618 4,420 4.5

Other Income 1,894 232 759 1,577 951 (49.8) (39.7) 2,528 3,578 -29.4

Interest Expenses 287 227 210 202 149 (48.0) (26.4) 351 518 -32.2

PBT 3,805 1,890 2,829 3,673 3,122 -18.0 -15.0 6,794 7,480 -9.2

Total Tax 853 606 2,070 2,096 185 -78.3 -91.2 1,233 1,890 -34.8

Adjusted PAT 2,951 1,284 759 1,577 2,937 (0.5) 86.2 5,561 5,590 -0.5

Extra ordinary items - - 2,070 2,096 - NA (100.0) 80 80

Reported PAT 2,951 1,284 -1,310 -519 2,937 (0.5) (665.5) 5,481 5,510 -0.5

Reported EPS 12 5 -5 -2 12 (0.5) (665.5) 22 22 -0.5

Margins (%) (bps) (bps) (bps)

EBITDA 25.3 22.0 25.1 25.9 26.3 101 42 26.1 25.5 53.0

EBIT 21.7 18.5 21.5 22.3 22.7 105 45 22.5 22.1 43.6

EBT 37.5 18.5 26.7 35.6 30.6 -695 -502 33.1 37.3 (423.8)

PAT 29.1 12.6 -12.4 -5.0 28.8 -34 3381 26.7 27.5 (80.2)

Effective Tax Rate 22.4 32.1 73.2 57.1 5.9 -1650 -5114 18.1 25.3 (711.8)

Segment-wise Revenue Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 YoY (%) QoQ (%) H1FY20 H1FY19 YoY %

Basic Chemicals 7,386 7,463 8,528 7,041 6,922 -6.3 -1.7 13,963 14,728 -5.2

Consumer Products 4,595 4,709 4,787 4,952 5,130 11.7 3.6 10,083 8,977 12.3

Specialty Chem 124 118 69 107 119 -4.4 10.4 226 236 -4.4

Segment-wise EBIT

Basic Chemicals 1,709 1,835 2,048 2,045 2,065 20.8 1.0 4,109 3,742 9.8

Consumer Products 864 590 862 725 734 (15.0) 1.4 1,459 1,687 -13.5

Specialty Chem -63 -62 -57 -47 -63 0.2 33.9 -110 -108 1.4

EBIT Margin (bps) (bps) (bps)

Basic Chemicals 23.1 24.6 24.0 29.0 29.8 668 78 29.4 25.4 402.3

Consumer Products 18.8 12.5 18.0 14.6 14.3 -448 -32 14.5 18.8 -432

Specialty Chem -50.6 -52.4 -82.8 -43.7 -53.0 -239 -929 -48.6 -45.8 -277





Standalone results

Soda ash volume declines on sluggish economy

Standalone revenues for Q2FY20 grew marginally by 0.7% yoy to Rs10.2bn. The basic

chemicals business de-grew 6.3% yoy to Rs6.9bn due to a 10% yoy fall in soda ash volumes.

The consumer products segment clocked 11.7% yoy growth to Rs5.1bn, driven by higher sales

volume across category and marketing investments benefits. Specialty chemicals revenue

decreased by 4.4% yoy to Rs119mn. Overall EBITDA grew by 4.7% yoy to Rs2.7bn, while

EBITDA margins expanded by 101bps yoy to 26.3% due to lower fuel costs in the soda-ash

business.

Subsidiary performance

TCNA (USA) – Better realization fuels margin

The North American business reported a 2.7% yoy increase in volumes. EBITDA margins

expanded 118bps yoy to 21%. Management expects better volume growth in FY20 than FY19,

which was impacted by power outage and maintenance issues.

Exhibit 11: TCNA (US) quarterly performance

Rs mn Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 YoY (%) QoQ (%)

Sales ('000 mt) 555 571 550 541 570 2.7 5.4

Realization / Rs mt 15,459 15,569 15,818 15,619 15,544 0.5 -0.5

US$ / mt 226 223 226 225 222 -1.5 -1.0

Net Sales 8,580 8,890 8,700 8,450 8,860 3.3 4.9

EBITDA 1,700 1,710 2,050 1,890 1,860 9.4 -1.6

EBITDA Margin (%) 19.8 19.2 23.6 22.4 21.0 118 -137

EBITDA/MT (Rs) 3,063 2,995 3,727 3,494 3,263 6.5 -6.6

APAT 450 350 2,070 470 460 2.2 -2.1


TCE (UK) – Margins expanded 400bps yoy

European sales volume decline (-7.2%) is attributed to the discontinuation of low-margin trading

business. EBITDA improvement and margin expansion were largely due to lower energy costs

and better efficiency.

Exhibit 12: TCE (Europe) quarterly performance


Sales ('000 mt) 83 83 76 68 77 -7.2 13.2


GBP / mt 466 487 546 505 497 6.7 -1.6

Net Sales 3,530 3,710 3,810 3,070 3,370 -4.5 9.8

EBITDA 330 140 270 150 450 36.4 200.0

EBITDA Margin (%) 9.3 3.8 7.1 4.9 13.4 400 847

EBITDA/MT (Rs) 3,976 1,687 3,553 2,206 5,844 47.0 164.9

APAT 60 -350 -150 -150 80 33.3 -153.3





TCML (Africa) – Higher realization helps margin expansion

Tata Chemicals’ Magadi business continues to focus on improving operational efficiencies.

Revenues stood at Rs1.4bn (up 8.6% yoy) due to higher sales realization (up 5.7% yoy). Margins

were better due to lower fixed costs and energy costs. Q2FY19 margins were impacted due to

higher cost pertaining to flood during the quarter.

Exhibit 13: TCML (Africa) quarterly performance


Sales ('000 mt) 72 80 79 63 74 2.8 17.5


US$ / mt 259 258 255 281 269 3.5 -4.3

Net Sales 1,280 1,440 1,410 1,230 1,390 8.6 13.0

EBITDA 130 290 310 200 270 107.7 35.0

EBITDA Margin (%) 10.2 20.1 22.0 16.3 19.4 927bps 316bps

EBITDA/MT (Rs) 1,806 3,625 3,924 3,175 3,649 102.1 14.9

APAT 40 190 230 90 160 300.0 77.8


Rallis: Revenue growth driven by exports; cost pressures drag margins

Rallis India (RALI) delivered five-quarter high revenue growth of 14.5% despite challenges in the

domestic business. Its focus on growth capex and revitalizing domestic business through new

product launches and changes in trade terms are playing out well. Exports increased 31% yoy

on the back of the commissioning of 500MT Metribuzin plant. Domestic business increased 6%

yoy on 4% growth in volumes. Metahalix revenues increased 51% yoy to Rs570mn due to the

recovery in monsoon in September. RALI’s domestic business delivered tepid growth

considering new trade terms. It has also launched four new products: two are patented and two

are co-marketed. RALI’s EBITDA margins came at 15.8% (down 302bps yoy). Higher technical

prices yoy resulted in lower margins despite higher revenue growth. We believe that margins

should improve from Q3 onward as some of the raw materials have started moderating although

nowhere near the historical levels. Apart from the domestic business, lower realization in exports

(Pendimethalin) could weigh in on gains from lower raw material costs.




Exhibit 14: Rallis Quarterly Performance (Consolidated)


Revenue 6,538 4,174 3,397 6,232 7,487 14.5 20.1 13,719 12,269 11.8

Operating Expenditure 3,797 2,526 1,930 3,856 4,785 26.0 24.1 8,642 7,259 19.0

Gross Profit 2,741 1,648 1,467 2,376 2,702 -1.4 13.7 5,078 5,010 1.4

as % of sales 41.9 39.5 43.2 38.1 36.1 37.0 40.8

SG&A expenses 1,507 1,371 1,399 1,428 1,515 0.5 6.1 2,944 2,945 0.0

as % of sales 23.1 32.9 41.2 22.9 20.2 21.5 24.0

EBITDA 1,234 276 68 948 1,187 -3.8 25.2 2,134 2,065 3.3

Depreciation 120 121 105 143 186 55.8 30.7 329 235 39.9

EBIT 1,114 156 -37 805 1,000 -10.2 24.2 1,806 1,830 -1.3

Other Income 89 59 110 80 68 (23.8) -15.2 148 138 7.0

Interest Expenses 9 18 17 16 19 116.1 19.7 35 18 94.9

PBT 1,194 196 56 869 1,049 -12.2 20.7 1,919 1,950 -1.6

Total Tax 343 59 42 194 252 -26.6 30.0 446 554 -19.5

Adjusted PAT 851 138 14 676 797 -6.3 18.0 1,473 1,397 5.5

(Profit)/Loss from JV/Ass/MI 1 1 2 2 9 550.0 378.9 11 3

APAT after MI 852 139 15 678 806 -5.4 19.0 1,484 1,400 6.0

Extraordinary items - - - - - - -

Reported PAT 852 139 15 678 806 -5.4 19.0 1,484 1,400 6.0

Reported EPS 4.4 0.7 0.1 3.5 4.1 -5.4 19.0 7.6 7.2 6.0


EBITDA 18.9 6.6 2.0 15.2 15.8 -302 64.0 15.6 16.8 -128

EBIT 17.0 3.7 -1.1 12.9 13.4 -368 43.8 13.2 14.9 -176

EBT 18.3 4.7 1.6 13.9 14.0 -425 6.3 14.0 15.9 -191

PAT 13.0 3.3 0.4 10.9 10.8 -227 -10.3 10.8 11.4 -59

Effective Tax Rate 28.8 29.9 75.8 22.3 24.0 -474 173.1 23.2 28.4 -516





Exhibit 15: Quarterly Performance (Consolidated)


Revenue 29,607 28,319 27,594 28,969 30,835 4.1 6.4 59,804 57,051 4.8

CoGS 13,035 12,822 11,409 12,472 14,071 8.0 12.8 26,544 25,466 4.2

Gross Profit 16,572 15,497 16,185 16,497 16,764 1.2 1.6 33,261 31,585 5.3

as % of sales 56.0 54.7 58.7 56.9 54.4 -4.5 55.6 55.4

SG&A expenses 10,552 10,785 10,877 10,574 10,415 (1.3) (1.5) 20,988 20,655 1.6

as % of sales 35.6 38.1 39.4 36.5 33.8 (7.5) 35.1 36.2

EBITDA 6,020 4,712 5,309 5,924 6,349 5.5 7.2 12,272 10,930 12.3

Depreciation 1,417 1,441 1,505 1,635 1,668 17.7 2.0 3,302 2,768 19.3

EBIT 4,603 3,272 3,804 4,289 4,681 1.7 9.1 8,970 8,161 9.9

Other Income 1,233 961 859 879 925 (25.0) 5.3 1,804 2,297 -21.5

Interest Expenses 921 972 851 944 872 (5.3) (7.6) 2,717 1,808 50.3

PBT 4,916 3,260 3,811 4,223 4,734 (3.7) 12.1 8,057 8,650 -6.9

Total Tax 1,199 716 296 1,301 388 (67.6) (70.2) 1,689 2,457 -31.2

Adjusted PAT 3,716 2,544 3,515 2,922 4,346 17.0 48.8 6,368 6,193 2.8

(Profit)/Loss from JV/Ass -372 -394 -7 27 -22 NA (181.4) 5 -591

Minority Interest 871 468 414 729 821 (5.8) 12.6 1,549 1,427

PAT after MI 3,217 2,470 3,108 2,166 3,548 10.3 63.8 4,814 5,357 -10.1

Extra ordinary items - 275 -979 80 - NA (100.0) 80 -

APAT after Extra-ordinary item 3,217 2,195 4,087 2,086 3,548 10.3 70.1 4,734 5,357

Post tax exceptional item 694 -80 8,543 -80 - NA (100.0) -33 -746

Reported PAT 3,911 2,115 12,630 2,006 3,548 (9.3) 76.8 4,767 6,103 -21.9

Reported EPS 13 9 16 8 14 10.3 70.1 22 21 5.2


EBITDA 20.3 16.6 19.2 20.4 20.6 26 14 20.5 19.2 136

EBIT 15.5 11.6 13.8 14.8 15.2 -37 38 15.0 14.3 69

EBT 16.6 11.5 13.8 14.6 15.4 -125 78 13.5 15.2 -169

PAT 13.2 7.5 45.8 6.9 11.5 -170 458 8.0 10.7 -273

Effective Tax Rate 24.4 22.0 7.8 30.8 8.2 -1620 -2262 21.0 28.4 -744

Segment wise Revenue Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 YoY (%) QoQ (%) H1FY20 H1FY19 YoY %

Basic Chemicals 20327 21417 22144 19455 20520 1.0 5.5 39,976 39,530 1.1

Consumer Products 4595 4709 4787 4952 5130 11.7 3.6 10,083 8,977 12.3

Specialty Chem 6686 4292 3466 6337 7603 13.7 20.0 13,940 12,505 11.5

Segment wise EBIT

Basic Chemicals 2779 2831 4673 3182 3553 27.9 11.7 6,735 5,532 21.7

Consumer Products 864 590 862 725 734 -15.0 1.4 1,459 1,687 -13.5

Specialty Chem 1051 94 -95 755 884 -15.9 17.1 1,640 1,722 -4.8

EBIT Margin (bps) (bps) (bps)

Basic Chemicals 13.7 13.2 21.1 16.4 17.3 364 96 16.8 14.0 285

Consumer Products 18.8 12.5 18.0 14.6 14.3 -448 -32 14.5 18.8 -432

Specialty Chem 15.7 2.2 -2.7 11.9 11.6 -409 -29 11.8 13.8 -201





Exhibit 16: SoTP valuation (Pre-merger)

EV/EBITDA EBITDA EV

(x) (Rs mn) (Rs mn)

India Soda Ash 6.1 8,231 50,207

Salt 14.7 4,384 64,443

Consumer (Pulses) - -438 -

Rallis (50.9% Share) 12.3 4,136 25,791

US Soda Ash 6.1 7,388 45,064

Europe Soda Ash 6.1 2,232 13,615

Africa Soda Ash 6.1 1,090 6,651

Total 7.6 27,023 2,05,770

Debt 51,354

Cash 30,324

Mcap 1,84,303

O/Shares 255

Target Price (Rs) 723

Source: Emkay Research, Company

Exhibit 17: Post-Demerger Target Price

EV/EBITDA EBITDA EV

India Soda Ash 6.1 8,231 50,209

Salt Manufacturing 2,610

Consumer (Pulses)

Rallis (50.9% Share) 12.3 4,136 25,894

US Soda Ash 6.1 7,388 45,067

Europe Soda Ash 6.1 2,232 13,615

Africa Soda Ash 6.1 1,090 6,649

Total 5.5 25,687 1,41,434

Debt 51,354

Cash 30,324

Mcap 1,20,405

O/Shares 255

Target Price (Rs) 472





Conference call highlights

Planned capex of Rs24.0bn on track

The company has announced Rs24bn (USD370mn) in capex toward capacity expansion at the

Mithapur facility. The capex will be used to enhance soda-ash capacity by about 200,000 MT

(USD100mn), salt production by 400,000 MT (USD100mn), and USD90mn for upgrading

turbines for higher efficiency with a reduction in carbon footprint. Furthermore, USD25mn and

USD15mn will be used to expand bicarbonate and cement plants.

Continuous capacity additions required globally

Management believes the demand supply will remain balanced over the long term. All the new

soda ash capacities that were set up globally were fully absorbed in the market. The recently

announced expansion from Solvay is likely to come after three years. As per management, ~1mn

MT capacity is required every 3-4 years to meet the growing demand. Hence, management is

positive on demand supply situation in the global market.

Price hike benefits in subsidiaries to reflect from Q4FY20

The company has effected price increases in the US and Africa in the last quarter. However, in

the US, mostly being an annual contracts, the meaningful impact will start reflecting from Q4FY20

(CY ending for the US). For Africa, the benefit will start reflecting in a step-by-step process.

Lithium-ion battery (E-battery) a big market

The company’s announcement in Q4FY9 to enter into the lithium-ion battery sector to develop

cell chemistries to meet Indian application looks positive. Batteries, being a one-third of the cost

of overall e-vehicle cost, provide a huge opportunity for battery manufacturers. First pillar in the

business will be to supply lithium battery to auto majors, second business is recycling of batteries,

and the third is chemical coatings which goes into making of these battery. Management expects

~Rs8bn capex in this segment.

Lower energy costs and better operation drive margin expansion

Despite volume decline in standalone, EBITDA margin improved 26bps yoy basis, driven by

better operational performance across geographies. Energy costs have come down in Europe

and Africa, which management expects to remain stable in the near term. Steady demand and

supply situation are favorable for the soda ash business globally; however, domestic soda ash

volumes will take cues from the recovery in auto and construction sector.

Consumer Products margin hit by higher marketing spend

Consumer products segment EBIT margins contracted by 448bps yoy to 14.3%, which was

largely driven by higher marketing spend on pulses and spices division , which has grown by

~25% yoy. Furthermore, the demerger cost of the segment is estimated to be Rs150mn for the

year, out of which Rs80mn has been incurred YTD FY20 and the rest will be done in H2FY20.

Other highlights

Other income in Q2FY20 was down 25% yoy as last year’s number included dividend

income from subsidiaries.

The company expects full-year tax rate for FY20 to be ~25%.

The demerger process is on track. Soon will be filing for the approval from NCLT.



SA: SUNIL TIRUMALAI November 1, 2019| 10

Exhibit 18: Peer comparison

Price Mkt Cap Reco

TP PE (x) PB (x) EV/EBITDA (x)

Company Name (Rs) (Rs bn) (Rs) FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E

Advanced Enzyme Tech 186 21 Buy 222 18.7 15.4 13.0 3.1 2.6 2.2 11.5 9.8 8.1

Apcotex Industries 168 9 Hold 177 18.7 25.8 18.9 3.1 2.9 2.6 12.9 14.5 11.3

BASF India 1,004 43 Buy 1,217 -98.0 22.1 15.4 3.1 2.7 2.3 32.1 10.9 9.0

Camlin Fine Sciences 66 8 Buy 73 1,256.4 37.9 14.4 2.2 2.9 2.4 16.7 9.9 6.4

GHCL 216 21 Buy 293 6.0 4.6 4.3 1.1 0.9 0.8 4.2 3.6 3.2

Navin Fluorine 898 44 Buy 958 29.8 24.2 18.8 4.1 3.6 3.1 20.3 16.8 14.6

SRF 2,896 166 Buy 3,210 26.4 21.4 16.7 4.1 3.5 2.9 14.8 13.0 10.3

Tata Chemicals 627 160 Buy 723 15.4 13.8 11.6 1.3 1.2 1.1 8.58 7.2 6.4

Vinati Organics 2,167 111 Hold 2,133 39.3 30.4 28.4 10.6 8.0 6.4 27.5 22.9 20.2





Key Financials (Standalone)

Income Statement

Y/E Mar (Rs mn) FY17 FY18 FY19 FY20E FY21E

Revenue 1,03,461 1,02,697 1,12,963 1,22,000 1,34,200

Expenditure 82,518 80,790 92,013 97,715 1,07,082

EBITDA 20,943 21,907 20,951 24,286 27,118

Depreciation 5,122 5,180 5,714 5,794 6,008

EBIT 15,821 16,727 15,237 18,492 21,110

Other Income 2,952 14,870 4,116 4,116 4,116

Interest expenses 2,973 3,256 3,631 3,501 3,291

PBT 15,801 28,341 15,722 19,107 21,935

Tax 3,460 601 3,469 4,204 4,826

Extraordinary Items (3) 11,576 (443) 992 992

Minority Int./Income from Assoc. (2,410) (2,694) (2,309) (2,356) (2,403)

Reported Net Income 9,934 13,470 10,386 11,556 13,715

Adjusted PAT 9,931 25,046 9,944 12,548 14,707

Balance Sheet


Equity share capital 2,548 2,548 2,548 2,548 2,548

Reserves & surplus 76,534 1,08,469 1,20,865 1,28,598 1,39,128

Net worth 79,082 1,11,017 1,23,413 1,31,147 1,41,676

Minority Interest 26,239 27,172 29,147 31,502 33,905

Loan Funds 77,160 73,051 67,557 62,077 57,077

Net deferred tax liability 0 0 0 0 0

Total Liabilities 1,82,482 2,11,240 2,20,116 2,24,726 2,32,658

Net block 1,29,771 1,31,956 1,43,248 1,43,054 1,54,052

Investment 38,279 37,145 44,377 44,377 44,377

Current Assets 67,817 89,477 81,062 88,027 88,494

Cash & bank balance 16,648 44,830 42,124 46,445 42,753

Other Current Assets 0 0 0 0 0

Current liabilities & Provision 53,386 47,339 48,570 50,733 54,265

Net current assets 14,431 42,139 32,491 37,295 34,229

Misc. exp 0 0 0 0 0

Total Assets 1,82,482 2,11,240 2,20,116 2,24,726 2,32,658

Cash Flow


PBT (Ex-Other income) (NI+Dep) 12,848 13,471 11,606 14,991 17,819

Other Non-Cash items 0 0 0 0 0

Chg in working cap 25,766 474 6,941 (483) (626)

Operating Cashflow 46,640 45,887 30,546 19,223 21,500

Capital expenditure 1,409 (7,365) (17,006) (5,600) (17,006)

Free Cash Flow 48,048 38,523 13,540 13,623 4,494

Investments (6,811) 1,134 (7,232) 0 0

Other Investing Cash Flow 0 0 0 0 0

Investing Cashflow (5,403) (6,230) (24,238) (5,600) (17,006)

Equity Capital Raised 10,539 31,935 12,396 7,734 10,530

Loans Taken / (Repaid) (32,284) (4,109) (5,494) (5,480) (5,000)

Dividend paid (incl tax) 2,803 5,605 3,185 3,822 3,185

Other Financing Cash Flow (40,045) (17,080) (12,199) (13,125) (11,371)

Financing Cashflow (37,242) (11,475) (9,014) (9,302) (8,185)

Net chg in cash 3,995 28,182 (2,706) 4,321 (3,692)

Opening cash position 12,654 16,648 44,830 42,124 46,445

Closing cash position 16,648 44,830 42,125 46,445 42,753





Key Ratios

Profitability (%) FY17 FY18 FY19 FY20E FY21E

EBITDA Margin 20.2 21.3 18.5 19.9 20.2

EBIT Margin 15.3 16.3 13.5 15.2 15.7

Effective Tax Rate 21.9 2.1 22.1 22.0 22.0

Net Margin 11.9 27.0 10.8 12.2 12.7

ROCE 9.7 16.1 9.0 10.2 11.0

ROE 13.5 26.4 8.5 9.9 10.8

RoIC 11.0 13.0 11.6 13.8 15.1

Per Share Data (Rs) FY17 FY18 FY19 FY20E FY21E

EPS 39.0 52.9 40.8 45.4 53.8

CEPS 59.1 118.6 61.4 72.0 81.3

BVPS 310.3 435.7 484.3 514.7 556.0

DPS 11.0 22.0 12.5 15.0 12.5

Valuations (x) FY17 FY18 FY19 FY20E FY21E

PER 16.1 11.9 15.4 13.8 11.6

P/CEPS 10.4 5.2 10.0 8.5 7.6

P/BV 2.0 1.4 1.3 1.2 1.1

EV / Sales 2.1 1.8 1.6 1.4 1.3

EV / EBITDA 10.5 8.6 8.8 7.2 6.4

Dividend Yield (%) 1.8 3.5 2.0 2.4 2.0

Gearing Ratio (x) FY17 FY18 FY19 FY20E FY21E

Net Debt/ Equity 0.8 0.3 0.2 0.1 0.1

Net Debt/EBIDTA 2.9 1.3 1.2 0.6 0.5

Working Cap Cycle (days) (7.8) (9.6) (31.1) (27.4) (23.2)

Growth (%) FY17 FY18 FY19 FY20E FY21E

Revenue (30.4) (0.7) 10.0 8.0 10.0

EBITDA 0.1 4.6 (4.4) 15.9 11.7

EBIT 1.1 5.7 (8.9) 21.4 14.2

PAT 29.4 35.6 (22.9) 11.3 18.7

Quarterly (Rs mn) Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20

Revenue 29,607 28,319 27,594 28,969 30,835

EBITDA 6,020 4,712 5,309 5,924 6,349

EBITDA Margin (%) 20.3 16.6 19.2 20.4 20.6

PAT 3,217 2,470 3,108 2,086 3,548

EPS (Rs) 12.6 9.7 12.2 8.2 13.9


Shareholding Pattern (%) Sep-18 Dec-18 Mar-19 Jun-19 Sep-19

Promoters 30.6 30.6 30.6 30.6 30.6

FIIs 11.1 10.8 10.1 10.7 9.4

DIIs 36.8 37.3 37.9 37.6 38.9

Public and Others 21.5 21.2 21.4 21.0 21.1

Source: Capitaline




RECOMMENDATION HISTORY TABLE

Date Closing

Price TP

Period (months)

Rating Analyst

17-May-19 620 723 12m Buy Amar Mourya

03-May-19 557 723 12m Buy Amar Mourya

06-Feb-19 594 723 12m Accumulate Amar Mourya

05-Nov-18 680 804 12m Accumulate Amar Mourya

14-Aug-18 678 804 12m Accumulate Amar Mourya

09-Jul-18 712 804 12m Accumulate Amar Mourya

21-May-18 735 804 12m Accumulate Amar Mourya

07-Mar-18 677 804 12m Accumulate Pratik Tholiya

07-Feb-18 681 804 12m Accumulate Pratik Tholiya

14-Nov-17 716 761 12m Accumulate Sumant Kumar

10-Aug-17 577 636 12m Accumulate Sumant Kumar

30-May-17 627 636 12m Hold Sumant Kumar

09-Feb-17 570 652 12m Accumulate Sumant Kumar

09-Dec-16 503 590 12m Accumulate Rohan Gupta

11-Nov-16 483 590 12m Accumulate Rohan Gupta


RECOMMENDATION HISTORY CHART

Source: Bloomberg, Company, Emkay Research

440

517

594

671

748

825

02

-No

v-1

6

02

-Ma

y-1

7

30

-Oct-

17

29

-Apr-

18

27

-Oct-

18

26

-Apr-

19

24

-Oct-

19

BUY Hold SellAccumulate Reduce PriceTarget Price




Emkay Alpha Portfolio – Specialty Chemicals

EAP sector portfolio

Company Name BSE200 Weight

EAP Weight

OW/UW (%)

OW/UW (bps)

EAP Weight (Normalised)

Speciality Chemicals 0.30 0.30 0% 0 100.00

Advanced Enzyme Tech 0.00 0.03 NA 3 10.00

Apcotex Industries 0.00 0.03 NA 3 10.00

BASF India 0.00 0.00 NA 0 0.00

Camlin Fine Sciences 0.00 0.02 NA 2 6.00

GHCL 0.00 0.01 NA 1 4.00

Navin Fluorine 0.00 0.04 NA 4 12.00

Orient Refractories 0.00 0.01 NA 1 4.00

SRF 0.13 0.12 -2% 0 41.00

Tata Chemicals 0.17 0.03 -81% -14 11.00

Vinati Organics 0.00 0.01 NA 1 2.00

Cash 0.00 0.00 NA 0 0.00

Source: Emkay Research

* Not under coverage: Equal Weight

High Conviction/Strong Over Weight High Conviction/Strong Under Weight

Sector portfolio NAV

Base Latest

01-Apr-19 01-Aug-19 01-Oct-19 31-Oct-19

EAP - Speciality Chemicals 100.0 99.7 105.7 114.4

BSE200 Neutral Weighted Portfolio (ETF) 100.0 102.9 106.3 112.2

*Performance measurement base date 1st April 2019


NAV chart


Please see our model portfolio (Emkay Alpha Portfolio): SMID

Please see our model portfolio (Emkay Alpha Portfolio): Nifty

95

100

105

110

115

120

Apr-19

NAV

EAP - Speciality Chemicals BSE200 Neutral Weighted Portfolio (ETF)

Analyst: Rohit Sinha

Contact Details

[email protected]

+91 22 6612 1306

Sector

Specialty Chemicals

Analyst bio

Rohit Sinha holds a CFA degree and

comes with total four years of experience

in the Specialty Chemicals sector. He

currently covers nine stocks in the

Specialty Chemicals space.

https://web3.emkayglobal.com/ResearchAccess/Upload/SMID_Oct19.pdf

https://web3.emkayglobal.com/ResearchAccess/Upload/Nifty_Oct19.pdf

mailto:[email protected]




Emkay Rating Distribution

Ratings Expected Return within the next 12-18 months.

BUY Over 15%

HOLD Between -5% to 15%

SELL Below -5%

Completed Date: 01 Nov 2019 17:59:02 (SGT) Dissemination Date: 01 Nov 2019 18:00:02 (SGT)

Sources for all charts and tables are Emkay Research unless otherwise specified.

GENERAL DISCLOSURE/DISCLAIMER BY EMKAY GLOBAL FINANCIAL SERVICES LIMITED (EGFSL): Emkay Global Financial Services Limited (CIN-L67120MH1995PLC084899) and its affiliates are a full-service, brokerage, investment banking, investment management and financing group. Emkay Global Financial Services Limited (EGFSL) along with its affiliates are participants in virtually all securities trading markets in India. EGFSL was established in 1995 and is one of India's leading brokerage and distribution house. EGFSL is a corporate trading member of Bombay Stock Exchange Limited (BSE), National Stock Exchange of India Limited (NSE), MCX Stock Exchange Limited (MCX-SX). EGFSL along with its subsidiaries offers the most comprehensive avenues for investments and is engaged in the businesses including stock broking (Institutional and retail), merchant banking, commodity broking, depository participant, portfolio management, insurance broking and services rendered in connection with distribution of primary market issues and financial products like mutual funds, fixed deposits. Details of associates are available on our website i.e. www.emkayglobal.com EGFSL is registered as Research Analyst with SEBI bearing registration Number INH000000354 as per SEBI (Research Analysts) Regulations, 2014. EGFSL hereby declares that it has not defaulted with any stock exchange nor its activities were suspended by any stock exchange with whom it is registered in last five years, except that NSE had disabled EGFSL from trading on October 05, October 08 and October 09, 2012 for a manifest error resulting into a bonafide erroneous trade on October 05, 2012. However, SEBI and Stock Exchanges have conducted the routine inspection and based on their observations have issued advice letters or levied minor penalty on EGFSL for certain operational deviations in ordinary/routine course of business. EGFSL has not been debarred from doing business by any Stock Exchange / SEBI or any other authorities; nor has its certificate of registration been cancelled by SEBI at any point of time. EGFSL offers research services to clients as well as prospects. The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. Other disclosures by Emkay Global Financial Services Limited (Research Entity) and its Research Analyst under SEBI (Research Analyst) Regulations, 2014 with reference to the subject company(s) covered in this report EGFSL and/or its affiliates may seek investment banking or other business from the company or companies that are the subject of this material. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that may be inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest including but not limited to those stated herein. Additionally, other important information regarding our relationships with the company or companies that are the subject of this material is provided herein. This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject EGFSL or its group companies to any registration or licensing requirement within such jurisdiction. Specifically, this document does not constitute an offer to or solicitation to any U.S. person for the purchase or sale of any financial instrument or as an official confirmation of any transaction to any U.S. person. Unless otherwise stated, this message should not be construed as official confirmation of any transaction. No part of this document may be used by private customers in United Kingdom. All material presented in this report, unless specifically indicated otherwise, is under copyright to Emkay. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of EGFSL . All trademarks, service marks and logos used in this report are trademarks or registered trademarks of EGFSL or its Group Companies. The information contained herein is not intended for publication or distribution or circulation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is prohibited unless otherwise expressly authorized. Please ensure that you have read “Risk Disclosure Document for Capital Market and Derivatives Segments” as prescribed by Securities and Exchange Board of India before investing in Indian Securities Market. In so far as this report includes current or historic information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed.

This publication has not been reviewed or authorized by any regulatory authority. There is no planned schedule or frequency for updating research publication relating to any issuer.

Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets Disclaimer for U.S. persons only: This research report is a product of Emkay Global Financial Services Limited (Emkay), which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of Financial Institutions Regulatory Authority (FINRA) or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account. This report is intended for distribution to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor. In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors.

http://www.emkayglobal.com/




GENERAL DISCLOSURE/DISCLAIMER BY DBS BANK LTD AS DISTRIBUTOR OF THE RESEARCH REPORT This report is solely intended for the clients of DBS Bank Ltd,its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report. This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer.

The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein. Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.

ANALYST CERTIFICATION BY EMKAY GLOBAL FINANCIAL SERVICES LIMITED (EGFSL) The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible of the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer, director or employee of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant). The research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. EGFSL has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the EGFSL and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of EGFSL compensation to any specific investment banking function of the EGFSL. 1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 2 Financial interest is defined as interest that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at the arm’s length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.




COMPANY-SPECIFIC / REGULATORY DISCLOSURES BY EMKAY GLOBAL FINANCIAL SERVICES LIMITED (EGFSL):

Disclosures by Emkay Global Financial Services Limited (Research Entity) and its Research Analyst under SEBI (Research Analyst) Regulations, 2014 with reference to the subject company(s) covered in this report-: 1. EGFSL, its subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of November 1,

2019 2. EGFSL, and/or Research Analyst does not market make in equity securities of the issuer(s) or company(ies) mentioned in this Research Report Disclosure of previous investment recommendation produced: 3. EGFSL may have published other investment recommendations in respect of the same securities / instruments recommended in this research

report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by EGFSL in the preceding 12 months.

4. EGFSL , its subsidiaries and/or other affiliates and Research Analyst or his/her relative’s does not have any material conflict of interest in the securities recommended in this report as of November 1, 2019.

5. EGFSL, its subsidiaries and/or other affiliates and Research Analyst or his/her relative’s does not have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the November 1, 2019

6. EGFSL, its subsidiaries and/or other affiliates and Research Analyst have not received any compensation in whatever form including compensation for investment banking or merchant banking or brokerage services or for products or services other than investment banking or merchant banking or brokerage services from securities recommended in this report (subject company) in the past 12 months.

7. EGFSL, its subsidiaries and/or other affiliates and/or and Research Analyst have not received any compensation or other benefits from securities recommended in this report (subject company) or third party in connection with the research report.

8. Securities recommended in this report (Subject Company) has not been client of EGFSL, its subsidiaries and/or other affiliates and/or and Research Analyst during twelve months preceding the November 1, 2019




COMPANY-SPECIFIC / REGULATORY DISCLOSURES BY DBS BANK LTD AS DISTRIBUTOR OF THE RESEARCH REPORT

1. DBS Bank Ltd., DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”) or their subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of 30 Jun 2019.

2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report. Compensation for investment banking services: 3. DBSVUSA, does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager

or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

Disclosure of previous investment recommendation produced: 4. DBS Bank Ltd. DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), their subsidiaries and/or other affiliates may have published other investment

recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd. DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), their subsidiaries and/or other affiliates in the preceding 12 months.

RESTRICTIONS ON DISTRIBUTION

General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Australia This report is not for distribution into Australia.

Hong Kong This report is not for distribution into Hong Kong.

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.

Malaysia This report is not for distribution into Malaysia.

Singapore

This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 16800306E) or DBSVS (Company Regn. No. 1860024G) both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an agreement under Regulation 32C of the financial Advisers Regulations. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd.

United Kingdom

This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication.

Dubai International Financial Centre

This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at units 608-610, 6th Floor, Gate Precinct Building 5, PO Box 506538, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

United Arab Emirates

This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent.

United States

DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other jurisdictions In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

Emkay Global Financial Services Ltd.

CIN - L67120MH1995PLC084899

7th Floor, The Ruby, Senapati Bapat Marg, Dadar - West, Mumbai - 400028. India

Tel: +91 22 66121212 Fax: +91 22 66121299 Web: www.emkayglobal.com

http://www.emkayglobal.com/




SINGAPORE

DBS Bank Ltd

Contact: Janice Chua

12 Marina Boulevard, Marina Bay Financial Centre Tower 3

Singapore 018982

Tel. 65-6878 8888

Fax: 65 65353 418

e-mail: [email protected]

Company Regn. No. 196800306E

THAILAND

DBS Vickers Securities (Thailand) Co Ltd

Contact: Chanpen Sirithanarattanakul

989 Siam Piwat Tower Building,

9th, 14th-15th Floor

Rama 1 Road, Pathumwan,

Nagkok Thailand 10330

Tel. 66 2 857 7831

Fax: 66 2 658 1269


Company Regn. No 0105539127012

Securities and Exchange Commission, Thailand

INDONESIA

PT DBS Vickers Sekuritas (Indonesia)

Contact: Maynard Priajaya Arif

DBS Bank Tower

Ciputra World 1, 32/F

JI. Prof. Dr. Satrio Kav. 3-5

Jakarta 12940, Indonesia

Tel. 62 21 3003 4900

Fax: 62 21 3003 4943





Rohit Sinha, CFA

[email protected]

+91 22 6612 1306

soda ash margin expands across rs 627 rs 723 ( october 31...

Documents