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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 Disclaimer: This report is meant for general information only and does not constitute an advice/ recommendation for purpose of buy or sell of any securities mention herein. Past Performance is not a guide for future performance. Future Returns are not guaranteed. Opinion expressed herein is subject to change without notice. Investors are advised to do their own research and may seek independent advice from Certified Financial Planner/ Registered Investment Adviser while investing in equity. Pee Aar Securities Ltd and its Directors and Employee shall not be responsible for any loss arising out of buy and sale of such securities. This Report is not intended to be a complete statement. Pee Aar Securities Ltd, its Employees and its affiliates are not responsible for any error detected in information contained in this report. This report has been prepared on the basis of publicly available information. User of this Report should keep above In mind and should not hold Pee Aar Securities Responsible for any loss, damage of any type whatsoever. Investment in the stock market is subject to the market risk.