DMCC Speciality Chemicals Downgraded to 'Sell' by MarketsMOJO on Poor Growth and Valuation Concerns

DMCC Speciality Chemicals, a microcap company in the chemicals industry, has recently been downgraded to a 'Sell' by MarketsMOJO on July 16, 2024. This decision was based on the company's poor long-term growth, as its operating profit has declined by an annual rate of -24.03% over the last 5 years. In addition, the company's recent financial results for March 2024 have been flat, with a decrease in net sales of -12.99% and a low operating profit to interest ratio of 1.92 times. The PBT less OI (profit before tax less other income) has also been at its lowest at Rs -0.78 crore. Furthermore, DMCC Speciality Chemicals has a high ROCE (return on capital employed) of 7.1, making its valuation expensive with a 3.1 enterprise value to capital employed. However, the stock is currently trading at a discount compared to its average historical valuations. Despite its small size, domestic mutual funds hold only 0.02% of the company, which could indicate that they are not comfortable with the current price or the business. Additionally, the stock has underperformed the market in the last year, with a return of only 0.65% compared to the BSE 500 index's return of 37.74%. On a positive note, DMCC Speciality Chemicals has a strong ability to service debt, with a low debt to EBITDA ratio of 1.05 times. However, the technical trend for the stock is currently sideways, indicating no clear price momentum. The trend has also deteriorated from mildly bullish on July 16, 2024, and has generated a negative return of -0.81% since then. In conclusion, based on the recent downgrade and various factors such as poor long-term growth, expensive valuation, and underperformance in the market, it may be wise to consider selling DMCC Speciality Chemicals stock. However, investors should also keep an eye on any potential changes in the company's financial performance and market trends.