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.