Sunday, 12 June 2016

GTS Weekend Answer: DCM Shriram Industries

Hope readers enjoyed the Weekend GST Puzzle with the chart.
Received 79 Answers out of which 18 answers were correct.

Right answers given by: Clayton Dsouza, Saif Khan, Amit Saini, Dinesh M Bohra, Ravish, CA Navneet Aggarwal, Puran Choudhary, Jayesh C, Ravi Multani, Pratik, Arun Negi, Raju NVM, Tush Agarwal, Krishnan Kannan, Lakshman Easwaran, Jyotiprakash Punmiya, Manoj Gadhia, Amit Malik.

Congratulations guys, well cracked!

The right answer is: DCM SHRIRAM INDUSTRIES LTD listed on BSE with code: 523369.
CMP: 166.65

The above chart shows a 10 year trendline breakout and a 6/7 years cup and handle breakout on the weekly charts of DCM SHRIRAM INDUSTRIES LTD.

DCM Shriram’s business primarily comprises of sugar, alcohol, power, chemical and rayon.
Under the sugar business the company produces sugar cubes & sachets, breakfast sugar,
refined sugar, etc. whereas under the alcohol business it manufactures a range of distillery
products like bulk alcohol, portable and country liquor products. The rayon business of
the company comprises of manufacturing a range of rayon and nylon based products
and chemicals. 

Under the chemicals business DCM Shriram offers a range of aromatic chemicals, drug intermediates and other chemicals. 

In the rayon business part company manufactures a product called Nylon Tyre Cord Fabric for which the Government last year has imposed dumping duty on imports from China which should be a positive for the company. NTCF finds application in different kinds of automotive tyres such as Bus tyres, Truck tyres, Two and three wheeler tyres, LCV, tyres and cycle tyres.

FY2016: Net Sales were 1216 crores out of which almost 55% was from Sugar and ENA/Alcohol. 24% was from Industrial Fibers and 21% was from Chemicals.

FY16 net profit was at 34 crores with EPS of 19.59. At cmp of 166.55 P/E is at 8.5.

Positives: The company has a positive book value at 140, The market cap is just 290 crores against sales of 1200 crores. Promoters have been increasing stake and have increased to 44.52%, another 38% lies with entities like LIC and HB Stockholding which have been holding the stock since more than 5-6 years which makes it almost 83% out of 17 crores shares are locked. Company has always paid dividend when in profits except for once in 2007 when company reported 1 crore net profit. P/E wise the company looks inexpensive and if Sugar story unfolds well then at forward eps looks very cheap.

Negatives: Total debt on the balance sheet is at 349 crores (73 crores long-term and 276 crores short-term) though it does not look huge compared to other sugar companies. Topline growth has been missing after FY14 which might suggest that the company might have already exhausted itself to the top but its only two years yet after a good healthy growth rate for 7 years. Reported results are very erratic with FY15 having just 5 crores bottomline, while FY14 had 29 crores.

This company is a result of division of DCM group family, I have not gone deep into management pedigree so cannot comment on that. Not very sure about Sugar capacity of the company on some websites it is mentioned as 33000 TCD and on some 12000/14000 TCD is the number.

This looks good as a diversified sugar company with a good focus on aromatic and other chemicals.

Sugar is the hottest sector right now and it seems that the sugar sector rally might just have started, and with added dimensions of Chemical and Industrial fiber this company might be a good option to consider providing better safety to volatile goverment policies and cyclical business risks at the same time coming with risks like volatile results and low margins in other businesses.

Another good diversified sugar stock is DCM Shriram Ltd which is the other division of the same DCM group focused on Sugar sector, Agri sector and Chemical sector.

Just wrote about DCM Shriram Industries because technical chart suggests that breakout can take the stock to good heights with Sugar sector buzzing, if the company's Q1-FY17 performance is impressive compared to Q1-FY16 that would mean the company may have a gala year ahead if Sugar story unfolds as expected.

Note: As I have not dug deep into the company I would be glad if readers can take up the task.

Note: The above is not a research report but information as available on public domain and it should not be treated as a research report.

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

Disclosure: It is safe to assume that i might have DCM Shriram Industries Ltd as well as DCM Shriram Ltd in my portfolio and hence my point of view can be biased. Readers should consult their financial advisory before any investments.


  1. Debt is high but on the other hand ICR is also at comfortable postition 2+.

  2. Sir, can still enter KM Sugar mills