Geojit Research has issued an ACCUMULATE rating on Tata Chemicals Limited with a revised target price of Rs 876 per share. The target aligns with the house’s view that TCL's European margin improvements, ongoing Indian capacity expansion, and stabilizing domestic demand position the stock for moderate upside, even as near-term headwinds persist from UK reconfiguration and variable global pricing. The call contrasts with prior periods where the house shifted between BUY and HOLD based on quarterly mix and currency effects. Geojit’s framework factors in a 26x FY27E adjusted EPS multiple to arrive at the Rs 876 target.

While consolidated profitability weakened sharply in the recent quarter due to lower realisations and subdued global demand, Tata Chemicals’ India business emerged as a bright spot, supported by volume growth and operational efficiencies. With margin recovery visible in Europe, stabilising prices, and disciplined capital expenditure in India, the company is positioning itself for a gradual earnings revival over FY26–27.

Geojit Upgrades Tata Chemicals to ACCUMULATE With Rs 876 Target

Geojit has revised its stance on Tata Chemicals, upgrading the stock to ACCUMULATE from HOLD, while lowering near-term earnings expectations to reflect ongoing market pressures. The revised target of Rs 876 is based on a valuation of 26x FY27E adjusted EPS. The brokerage acknowledges the near-term pain but believes the worst of the downturn may be behind the company, particularly as India demand remains resilient and European margins begin to recover.

Global Market Downturn Weighs on Quarterly Performance

• Consolidated revenue slipped amid pricing pressure.
During Q2FY26, Tata Chemicals reported consolidated revenue of Rs 3,877 crore, a marginal decline of 3.1% year-on-year. The weakness was primarily attributed to subdued global market conditions and a reconfiguration of the UK business.

• EBITDA contraction reflects lower realisations.
EBITDA declined 13.1% YoY to Rs 537 crore, with margins compressing by 160 basis points to 13.9%. Lower average selling prices across regions offset the benefit of higher volumes.

• Profitability took a sharp hit.
Reported profit after tax fell 42.3% YoY to Rs 154 crore, underscoring the impact of pricing headwinds and weaker contribution from overseas operations.

India Business Emerges as a Structural Growth Anchor

• Strong volume growth supports domestic revenues.
India revenues rose 19.3% YoY to Rs 1,204 crore, driven by higher volumes and improved operational efficiency. Unlike international markets, domestic demand remained robust across soda ash, salt, and value-added products.

• Margins expected to stabilise.
Although margins softened sequentially due to pricing pressure, Geojit expects pricing to stabilise while volumes continue to trend upward, supporting incremental margin recovery in coming quarters.

• Capacity expansion underpins long-term growth.
Prudent capital expenditure focused on Indian capacity expansion is expected to strengthen Tata Chemicals’ competitive position and support sustainable earnings growth.

Europe and UK Show Early Signs of Turnaround

• European margins show encouraging improvement.
Despite weak demand, Tata Chemicals’ European business reported margin improvement, aided by a favourable product mix and cost optimisation measures.

• UK business nearing breakeven.
The reconfiguration of the UK operations is nearing completion, with management guiding toward profitability by Q4FY26. A shift toward value-added and non-cyclical products is expected to reduce earnings volatility.

Financial Outlook Indicates Gradual Recovery

Geojit expects earnings to rebound sharply over FY26–27, with adjusted PAT projected to grow at a healthy pace as pricing stabilises and operating leverage kicks in.

Balance Sheet Remains Stable Despite Near-Term Stress

• Debt levels remain manageable.
Debt increased during H1FY26 due to currency impact of approximately Rs 250 crore and higher inventory levels. Management expects inventory-related debt to normalise in the second half.

• Leverage ratios remain comfortable.
Debt-to-equity is projected to remain stable at around 0.3x through FY27, providing balance sheet flexibility during the recovery phase.

• Liquidity position adequate.
While working capital intensity remains high due to inventory cycles, the company maintains sufficient liquidity buffers to fund operations and capex.

Stock Levels and Investment Strategy

• Current Market Price (CMP): Rs 777
• Rating: ACCUMULATE
• Target Price: Rs 876
• Upside Potential: ~13%
• Time Horizon: 12 months

Key Technical Levels:

Immediate support: Rs 740

Strong support zone: Rs 700–715

Near-term resistance: Rs 820

Breakout confirmation: Above Rs 845

Medium-term investor target: Rs 876

Geojit advises investors to accumulate the stock on dips, given limited near-term upside but improving medium-term fundamentals.

Key Risks to the Investment Thesis

• Prolonged global demand weakness.
Extended softness in international soda ash and chemical markets could delay earnings recovery.

• Volatility in pricing.
Any renewed decline in global realisations may pressure margins and profitability.

• Currency fluctuations.
Forex volatility could impact debt levels and reported earnings, particularly in overseas operations.

Bottomline: A Cyclical Bottom With Recovery Potential

Tata Chemicals is navigating a difficult phase marked by global market weakness, but underlying fundamentals remain intact. The strength of the India business, early signs of recovery in Europe, and a clear path to UK profitability provide confidence in a gradual earnings turnaround. While near-term visibility remains limited, Geojit’s upgrade to ACCUMULATE reflects improving risk-reward dynamics at current levels.