KCP Ltd CMP 160
KCP Ltd is engaged in the business of manufacture and sale of cement, sugar, heavy engineering, power generation for captive use and hospitality.
Financial
- ROE and ROCE is around 18% and 22% respectively (Very Positive).
- Forward PE – 12 which is very good as per Industry benchmark
- Face Value – INR 1, P/BV – 0.5, MCAP – INR 2040 Cr
- Return on assets – 9.2% (Positive), CMP/FCF – 23.7 (Positive)
- Interest coverage ratio – 6.56 as compared with last year 3.26
- Q4FY21 Topline was around INR 532 Cr Vs. 351 Cr in Q4FY20 Vs. 441 Cr in Q3FY21 therefore up by 51.5% in YoY and 20.6% in QoQ.
- FY21 Topline was around INR 1,714 Cr Vs. 1,424 Cr therefore up by 20.3% in YoY
- Q4FY21 bottom line was around INR 75 Cr Vs. 23 Cr in Q4FY20 Vs. 33 Cr in Q3FY21 therefore up by 226% in YoY and 127% in YoY
- FY21 bottom line was around INR 163 Cr Vs. 27 Cr in March 2020 therefore up by 503% in YoY.
- Operating Profit margin was around 26% in Q4FY21 and 23% in March 2021 and it was continuously increasing in YoY and up by 900 bps as compare with march 2020 (Very Positive).
Promoter holding was around 43.9% in June 2021 which was slightly increased in June 2021 quarter. FIIs and DIIs hold less than 1% stake in the company.
Debt as of March 2021 was around INR 351 Cr and reduced by more than 36% as compare with Dec 2020 quarter.
Ace Investor Dolly Khanna hold 4.3% stake in the company and which was increased by 1% in June 2021 quarter.
Strength/Key Positive
- The KCP group has been in the cement business for over five decades. The cement division is estimated to witness volume growth of around 25% in fiscal 2021 compared with fall of around 5% in industry volume across South India. The company continues to have significant market footprint in the Andhra Pradesh and Telangana regions. Overall revenue from this division is estimated at Rs 1,200 crore in fiscal 2021 compared with Rs 844 crore in fiscal 2020. Cement cover 55% of the overall topline for the FY2021.
- The group also has sugar crushing capacity of 11,000 tonne per day (tpd) in Vietnam housed under the subsidiary i.e. KCP Vietnam Industries Ltd. Revenue from this segment is 20-30% of the overall consolidated group. Sugar cover 31% of the overall topline for the FY 2021.
Power Business (7% of Revenues)
The company has various power capacities which are primarily installed for internal consumption for various businesses. It has a total installed capacity of ~34 MW from different power sources i.e. Hydel, Wind, Thermal and Solar.
Heavy Engineering Business (5% of Revenues)
The business was established in 1955 and it offers a world class build to order heavy manufacturing facility, with fully integrated steel foundry, heavy fabrication, heavy machine shops with assembly facilities.
Healthy operating performance: The financial risk profile has strengthened further, indicated by improved leverage, as visible in estimated debt to EBITDA ratio of around 1.25 times in fiscal 2021 compared with 2.74 times in the previous fiscal.
Debt protection metrics also improved, as seen in interest coverage ratio improving to around 7 times in fiscal 2021 from 3.26 times in fiscal 2020. Net cash accrual, projected at Rs 210 crore in fiscal 2022, will sufficiently cover debt obligation of around Rs 72 crore. Cash and cash equivalents for the KCP group are estimated at Rs 350 crore as on March 31, 2021.
Concern/Risk
- Heavy engineering business which constitute 5% of overall topline has been affected due to slowdown in industrial growth.
- Hotel business which company recently entered and cover nominal 1% of the topline the Covid-19 pandemic has severely impacted the hospitality industry and recovery in the sector is expected to take more time compared with other sectors.
View
Share price high (52 week) INR 167 and now 158 is trading their life time high. Multiple year breakouts above 150 along with strong volume seen in this counter. Company has reasonable valuation at current forward PE of around 12 which is low as compared with industry average. Investor should continue with the company and add at CMP and if it correct 135-140 add more. Target can be 180/240 in short to mid term.
Disclaimer
Views are shared personal in nature. Others can take different view/opinion. Please do thoroughly due diligence before enter or exit the shares.
