DCB has attracted a lot of attention recently. A lot of people I know are interested in knowing that what exactly is happening in DCB. Many of them have already purchased seeing crazy run ups it has shown recently. Thus Im dedicating this post to DCB where I’ll talk about what is happening as well as how does DCB look fundamentally.

First, let me tell you the action happening in DCB. DCB has attracted a lot of traders in the scrip recently, I’m not entirely sure if it has something to do with Rakesh Jhunjunwala but I can tell you that any scrip he enters does see crazy run ups followed whether the stock is fundamentally good or not. DCB is in a trading range of 57 – 64 as of now. People are trading heavily in this scrip in that range and it might be possible that it breaks that on the upside if the markets recover. Short term traders can enter in this stock around 58 – 59 and sell around 63 – 64. Im not the best person to advice on trading but can confirm you that in DCB, all what is happening is trading and any panic among traders will invite decent amount of fall in this scrip.

The reason DCB has run up sharply recently is because of it’s good Q4 FY11 results where it posted a sharp rise in it’s net profits as against a net loss. The company is a turn around story and strong growth is visible in FY12 as well. But nevertheless growth is not looking that big to support much higher levels from now. The stock was attractive around 50 levels where it was a clear buy but now it is just play trade.

On a fundamental basis, DCB is definitely not supportable at higher levels from now, and thus I ask long term investors to NOT enter at current levels. If any investor wants to enter the scrip, enter below 57-58 and not at the current levels of 62-63 because the upside is not a whole lot. The company posted an EPS of 1.1 for FY11 and is expected to grow 250% in FY12. I know that the growth rate looks interesting but don’t get carried away by growth numbers. The stock is not going to grow in same pace in FY13 as then the growth will come to normal. The growth looks interesting as it just came out of losses. In terms of valuations, DCB currently trades at a P/E of 56 and one year forward P/E of 25. You can clearly look that the stock is high priced. The only thing that can sustain DCB at much higher levels than now is if it beats earning estimates and posts an extra ordinary EPS for FY12.

I can see this stock heading anywhere between 65 – 72 where I will advice to exit and wait for dips to buy this scrip again. The upside looks capped around 70-72 levels, so from an investor point of view, I don’t see a point of buying at 62 and waiting for 72 kind of levels. There are a lot of other stocks available for long term investors that can fetch more returns than this scrip. My advice is to play trade in this scrip but don’t go long in this scrip unless you have bought from below 57-58 levels from where it posts an upside of 25% for medium term view.

DCB has a target of 70-72 from a 6-12 months perspective

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