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Friday, October 16, 2009

DCW Ltd:Is it a buy/hold or sell?future growth prospects and analysis

Scripscan:DCW Ltd

Story:DCW derives majority of its revenues from PVC resins; various chemicals including soda ash and caustic soda make up the balance. A diverse portfolio of products in its basket helps in reducing risk against a downturn in a particular industry.Moreover forward integration in the chlor-alkali business serves a risk mitigation strategy.Margins at its soda ash unit continue to remain low as compared to its competitors. Lack of captive limestone quarries works to its disadvantage. Detergents and glass manufacturing industries are among the larger consumers of soda ash. The growth in the realty construction industry — a large consumer of float glass — is likely to provide a sustained demand for soda ash.Though its other chemical businesses, which comprise up-gradation of ilemnite and manufacture of synthetic-iron-oxide, contribute only marginally to revenues. It proposes to increase its capacity in these businesses, which could result in additional revenue. A low debt-equity ratio provides it leverage to raise funds to meet capital requirements for these projects.A healthy growth in the construction and agriculture sectors will help the PVC industry maintain its growth path. DCW will be able to meet the growing demand.Its wind turbines would also result in lower fuel costs at its caustic soda facility.Its expected to post decent numbers going forward.Considering all the points,its a hold as of now.

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