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Wednesday, November 3, 2010

Dont expect KCP to spice up your portfolio



A premier producer of cement and industrial machinery, KCP is one among the leading industrial groups in India. Innovation being the premise, dedication and detail are the other assets that have lead to strong proceeds of KCP. Technology formulates the chic of our service with cutting edge, state of the art facilities and latest process trends that are applied in areas such as critical industrial equipment for mineral processing and chemical industries, steel plants, space research applications and Nuclear / Hydel power installations. KCP has set up over 38 sugar plants and 12 cement factories.
KCP has an Equity base of Rs.12.89 crores and its Market Cap of Rs. 410 crores. While the Net Profit Margins ranging between 16 to 18 per cent plus. However, the company’s top line and bottom line is erratic as can be seen in the table provided below:



2009-10
2008-09
2007-08
2006-07
Total Revenue
382
353
406
294
PAT
60
65
66
48
PAT Margin
15.6
18.6
16.3
16.4


Q2FY11 numbers too are not encouraging – total revenues for the quarter stood at Rs.86 crores as compared to Rs. 109 crores in Q2FY10, down by around 21 per cent.. PAT in Q2FY11 stood at Rs.4.96 crores as compared to Rs.21.64 crores in Q2FY10,- a staggering reduction of 77.07 per cent.
The company derives around 50 per cent revenues from its cement division,, around 42 per cent from its Engineering segment and balance from its power division.
Promotor’s stake in the company stands at 46.26 per cent and DII’s stake is 6.91 per cent. Though the company has a low Debt Equity ratio, the company will need to make strenuous effort to ramp up its top line and bottom line with greater thrust in its Engineering and power division.

Conclusion: Though KCP may appear to be cheap at a PE of around 11, its dismal Q2FY11 performance and looking at the low delta in 52 week high low of Rs.37.46 – 25.40, the stock may hardly do any wonders for your portfolio.

Kishor S. Khot, [Kishor@hbjcapital.com], Equity Strategist, HBJ Capital Services Pvt Ltd





















































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