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KCP Ltd
14th May 2017
KCP is in the Cement & Sugar Sector. The Current market
capitalization stands at Rs 1636 crore.
KCP is in a very diversified business, working in Cement,
Power, Heavy Engg, Power and Hospitality. But primarily
company is engaged in Cement and Sugar sector. Cement
industries are spread in Andhra Pradesh (Spreading in big area
between Vijayvada and Guntur). Company is also a big
participant in Vietnam Sugar Industry. Company’s wholly owned
subsidiary based in Vietnam “KCP Vietnam Industries Ltd”
performing well and expanded capacity in sugar business. In the
last two to three years, Company has expanded the capacity of
both Cement and Sugar. KCP has also been involved in
development of the Sugar Industry in Vietnam by supplying core
equipment to various sugar factories and also executing turnkey
projects in Vietnam.
Book Value: 47.72 Per Share, Equity Capital: 12.89 Crore.
Market Capitalization: 1648 Crore, Debt Size is: 386 Crore
Promoter Holding 45.23 % ( only 7 % shares are Pledged ) ,
Institutional & Corporate Holding : 12.06 % , Balance 42.71 %
holding with general Public.
Cement sector outlook: Overall demand recovery expected to
grow in housing and commercial segments. Home buyers are
increasing due to price penetration and various incentives given
by the Govt. of India. Demand of Cement sector is increasing
due to increased government expenditure on Infrastructure
sector and Construction sector.
India is the second largest producer of cement in the world.
India cement industry is a vital part of its economy, providing
employment to large section of individuals, directly or indirectly.
India has a lot of potential for development in the infrastructure,
construction and cement sector. And KCP will get benefit from
it.
Some of the recent major government initiatives are like
development of 98 Smart Cities. Housing for all is expected to
provide a major boost to the sector. Cement demand in India is
expected to increase due to government’s push for large
infrastructure projects, resulting in 45 million tons (MT) of
cement needed in the next three to four years. India's cement
demand is expected to reach 550-600 Million Tons Per Annum
(MTPA) by 2025. The housing sector is the biggest demand
driver of cement, accounting for about 67 per cent of the total
consumption in India. The other major consumers of cement
include infrastructure at 13 per cent, commercial construction at
11 per cent and industrial construction at 9 per cent. To meet the
rise in demand, cement companies are expected to add new
capacity over the next three years.
Standalone Financial of KCP are as follows
Sale
Quarter ending
Dec
200 Cr
2016
Quarter ending
Sept
198 Cr
2016
Quarter ending
June
177 Cr
2016
Nett Profit
10 Cr
7.3 Cr
3.24Cr
As Per above Quarterly Result, Company Net profit has
increasing more than 50% on Quarter to Quarter Basis.
Further with Increase in production of Construction activities in
State of Telangana and Andhra Pradesh, Demand of cement
expected to be high due to higher Govt spending on Infra and
Construction.
Amravati is the new capital of Andhra Pradesh; this is in
between Vijayawada and Guntur cities. For development of this
ultra modern City Capital, lot of Cement being supplied by
Company for construction of Infrastructural development.
Company’s Top line & Bottom-line likely to accelerate further at
faster pace. Recently Cement prices appreciated very high,
which shall be reflected in bottom-line of current quarter ending
June 2017.
Cement Transportation constitute one of the major component
of cost, Whereas KCP shall benefit from low cost in
transportation, since most of the supplies are in State of
Telangana and Andhra Pradesh , which are located near to the
company manufacturing facilities.
Company sugar subsidiary is in Vietnam alone is likely to
report the bumper profit of about Rs 100 Crore besides profit
from Cement business in India
Company current stock price fairly at 127 per share, close to 52
Weak High. With further anticipated growth in CAGR of 25 % in
Top line and Bottom-line of Company , Company stock price is
further expected to appreciate within Next Twenty Four
Month and surpass the Target of Rs 200 Per share. Hence it is
suggested to buy KCP on decline/price correction
Equity Research Team
Pee Aar Securities Ltd
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