After doubling money, don’t get tempted to sell Tatva Chintan Pharma Chem shares

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Shares of Tatva Chintan Pharma Chem on Thursday got listed at Rs 2,111.85, registering a gain of 95% against the issue price of Rs 1,083 on the NSE. At 1:30 pm, the stock was quoting at Rs 2,271 apiece extending its rally, implying a premium of 109.7%. On an intraday basis, it touched a high of Rs 2,534 surging as much as 133.98% over its issue price.

Gaurav Garg of CapitalVia Global recommends holding the stock for capital gains in the long term. “Tatva Chintan Pharma Chem is poised to perform well in the near future due to its strong financials, diverse product line, and global presence with a large client base,” Garg said.

Even Sneha Poddar of Motilal Oswal Financial Services believes the same. “Over FY18-21, Tatva Chintan’s Revenue/ PAT grew at 30%/62% CAGR (compounded annual growth rate), supported by margin expansion of almost 500 basis points to 21.9%. Tatva Chintan is expected to do well due to its leadership position, wide product portfolio, strong client relationship and capacity expansion leading to strong growth ahead,” added Poddar.

However, Marwadi Shares and Finance thinks otherwise. “Investors to book profit due to stretched valuations and re-enter at lower levels. The valuation at a listing price of Rs 2,112 comes out to be 85.87 times on the basis of P/E (price to equity) multiples which is expensive as compared to its peers namely Aarti Industries and Navin Fluorine which are trading at P/E of 60.99 and 70.39, respectively. The post listing run upon stock price has further stretched the valuations leaving more room for downside than upside for a long-term investor,” said Saurabh Joshi of Marwadi Shares and Finance.

Tatva Chintan Pharma Chem Limited is a chemical manufacturing company that manufactures structure-directing agents (SDAs), phase transfer catalyst (PTCs), pharmaceutical and agrochemical intermediates, and other specialty chemicals. It is among the largest manufacturer of SDAs for zeolites in India. As of March 2021, the company offered 47 products under its SDA product portfolio, 48 products under its PTC product portfolio, six products under its electrolyte salts for supercapacitor batteries portfolio and 51 products under its PASC portfolio.

For the financial year ended March 31, 2021, the company reported total revenue of Rs 306.29 crore compared to Rs 206.8 crore in FY19. Its bottom line more than doubled in the last three financial years as it reported a profit after tax of Rs 52.26 crore in FY21 versus Rs 20.54 crore profit posted in FY19.

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