DCM Shriram Consolidated ltd and Indage Vintners Ltd:Future growth prospects and outlook,buy/sell?

Story:Diversified companies is a category of stocks that fund managers don’t like. DCM Shriram Consolidated Limited has interests in sugar, fertilisers, chemicals, hybrid seeds, building systems and cement. All of these segments are doing well. Its agribusiness comprises fertiliser, sugar and seeds and contributes to over 50% of the turnover. It also has a rural business centre – Hariyali Kissan Bazaar with 301 outlets throughout the country. Agro-input business produces urea and markets other brands of fertilisers and pesticides. The company has started procuring gas from Krishna-Godavari Basin for its urea production. It has four sugar plants with crushing capacity of 33,000 tonnes per day (tpd) and a power generation capacity of 70.5MW. All the sugar plants are self-sufficient in meeting their power requirement from the captive plants.The chemical division (contributes 23% to the turnover) manufactures chlor-alkali and related chemicals like caustic soda lye and flakes, liquid and gaseous chlorine, hydrochloric acid and stable bleaching powder. The manufacturing facility is in Kota (Rajasthan) and Bharuch (Gujarat). It has completed the chlor-alkali expansion from 200tpd to 440tpd at its Bharuch facility along with commissioning of the 48MW coal-based power plant. It manufactures multiple grades of PVC resins. The total capacity is 70,000tpa. It uses the calcium carbide route to manufacture PVC resins, whereas all other manufacturers use the ethylene route. The surplus calcium carbide produced in its plant is sold to chemicals and steel industries after its own requirements are met. It manufactures unplasticised PVC windows and doors. DCM is into building systems too; Fenesta has become a leading brand. DCM is a turnaround story in a year that has been tough for many companies. For 2008-2009, its turnover was up 36% and operating profits have been accelerating. In the March 2009 quarter alone, operating profit and net profit were Rs120 crore and Rs81 crore, respectively. Given the growth momentum, DCM Shriram Consolidated can end FY09-10 with a profit of Rs180 crore which will mean an EPS of Rs11. At the current price of around Rs51, the stock is available at five times its estimated profit for this year. Its market-cap to sales is 0.25 times and operating profit to market-cap is 2.44 times. Even if the valuation remains the same, the stock could go up by 60%-70%, thanks to possible profit growth. Buy the stock at Rs40.

Grasim board approves cement biz demerger into Samruddhi

The Grasim board that met today has decided to demerge its cement business into Samruddhi Cement, a wholly-owned subsidiary of the company. Grasim’s shareholders would receive one equity share of Samruddhi for every one share they held in Grasim.
Samruddhi’s share post demerger would be in addition to that of Grasim’s and Grasim shareholders would own 35% of Samruddhi. “Post demerger, Grasim will own 65% of Samruddhi,” stated the company’s press release adding that Samruddhi would be listed post the demerger scheme is made effective.

Samruddhi is yet to make formal consolidation proposal to UltraTech Cement board.

For the company's complete press release, click here.

Kumaramangalam Birla Chairman of Aditya Birla Group says that the board considered various other options before approving the structure and only proposals ensuring continued control and strategic interest were considered. “The move reaffirms the continuing interest in the cement business.”

Grasim’s management, while addressing a press conference, says the transfer from the company will not include investment in UltraTech Cement.

Buy Subros, target of Rs 50: Sharekhan

Sharekhan has maintained its buy rating on Subros with a target price of Rs 50 in its September 30, 2009 research report. On Thursday, the share was quoting at Rs 41.10, down Rs 0.25, or 0.6%.

"In line with the increase in our estimates, our price target stands revised to Rs 50 (based on 10x FY2011 earnings estimate). At the current market price the stock is trading at 8.2x its FY2011E earnings and enterprise value (EV)/earnings before interest, tax, depreciation and amortisation (EBITDA) of 3.6x. We maintain our 'Buy' recommendation on the stock," says Sharekhan's research report

Buy Ratnamani Metals, target of Rs 133: Sharekhan

Sharekhan has maintained its buy rating on Ratnamani Metals and Tubes with a target price of Rs 133 in its September 30, 2009 research report. On Thursday, the share closed at Rs 106.15, down Rs 1.25, or 1.16%.

"The company has been witnessing gradual improvement in its business environment. RMTL’s specialty products consumed in high-growth sectors like power would drive the volumes going forward. Further, meaningful revival in orders from the refinery sector could add to incremental orders. At the current market the stock trades at 4.8x its FY2011 estimates, which we feel is attractive and thereby reiterate a 'Buy' on the stock, target of Rs 133," says Sharekhan's research report.

Buy M&M Financial Services, target of Rs 275: FinQuest Sec

FinQuest Securities has recommended a buy rating on Mahindra & Mahindra Financial Services with a target price of Rs 275 in its October 1, 2009 research report. On Thursday, the share closed at Rs 233.35, up Rs 3.30, or 1.43%.

"The company's asset quality risk is already priced due to aggressive provisioning policy. Currently the stock is trading at 1.6x FY10 ABV, a significant discount to Shriram Transport finance. We believe that MMFSL will make 17% RoE's by FY11 (15.4% in FY09) led by strong earnings growth and should trade at 1.7x FY11 ABV. We initiate coverage with a target price of Rs 275," says FinQuest Securities' report.