6

Hello Investors

With a lot of buzz around sugar sector these days, the biggest pain according to me is selecting a decent company among the ones with huge debts and accumulated losses. Sugar sector has been among the worst performers as far as past 5 years are to be considered, and the same is being reflected still in the balance sheets of the companies. However, since past year, the sector had become one of the turn-around candidates. Now keeping the fundamental aspects into consideration, one has to be very careful in selecting the companies and find a safer investment option, which as per my analysis KCP Sugar & Industries Corp. Ltd fulfills.


Reasons behind the sugar sector bullishness :


  1. There has been drought in our country for the past 2 years, therefore the sugarcane agriculture had dropped miserably, leading to lower production of sugar. However, the demand remains same. This has led to increase in sugar prices, leading to greater yield for the sugar manufacturing companies.
  2. Moreover, Internationally too the sugar prices have remain firm, which further boosts the sentiments and as per experts sugar prices are going to remain solid for the upcoming 2–3 quarters.
Therefore, financials of these companies are expected to improve, considering which investors are bullish on the sector as a whole, which has led to spurt in the stock prices.

The Company:

K.C.P Sugar and Industries Corporation Ltd is one among the leading sugar manufacturing companies in India . Its allied business consists of manufacturing and marketing of Rectified Spirit, Extra Neutral Alcohol, Ethanol, Incidental Cogeneration of Power, Organic Manure, Mycorrhiza Vam, Calcium Lactate and CO2. Company has two sugar factories located in Krishna District Andra Pradesh having an aggregate crushing capacity of 11,500 tons per day.

FUNDAMENTAL VIEW

  1. Debt-Equity ratio of the company is quite favorable which is very rare in sugar companies, presently it is below 0.5:1
  2. After strengthening of the prices of sugar, company is performing exceptionally well on profitability front in the current financial year. Current year's net profits this year are expected to be more than 40 crores, resulting in ROE >18% 
  3. KCP Sugar has around surplus land on Mount Road in Chennai which is, in our view, significantly higher (in value) than the companies' market cap of about Rs.330 crore.
  4. Apart from this, the company owns several residential properties in Chennai & Hyderabad, which depicts company's ability to pay its debt easily.
  5. It is now trading at P.E multiple of  9  & has corrected around 33% from its peak. However the fundamental remains intact.
  6. The operating margin as per FY 15-16 was more than 12% which is significantly higher then its peer companies.
Looking at the steep valuations at which the other sugar companies are trading, a target of 45 is very conservative for the company

TECHNICAL VIEW

  1. The stock is currently above its 20,50,200 day moving averages, currently trading comfortablly around 32 which is its 200 DMA.
  2. Also it has breached its downward sloping trend line and is now comfortably trading above it as under:

Other Indicators namely ADX, MACD, ATR, RSI, MFI, OBV and Stochastics too provide bullish signals.

COCLUDING DECISION

     Investors can look forward to buy at CMP of Rs. 32, keeping Rs. 27 levels as stop loss for positive returns. Since this is a commodity stock do not go for long term investment. Take a horizon of 4-5 months to get decent returns.

     Best wishes for your Investment !!!
     
     Thanks !!!

Note : The above is just information available in public domain and therefore should not be taken as research report.

Registration status with SEBI:  I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations.

Disclosure : I personally do not have any holding in this script, Investors are advised to consult                     financial advisory before any Investments.









Post a Comment

In my point of view, this is really very well and informative content given about Luxury apartments accompanied by world-class amenities for a modern lifestyle in Chennai. Thanks for given this information here about this blog.
Flats in Malviya Nagar

You always do a great job of explaining things. I can definitely see where you're coming from and I appreciate the
insight. I shared this on Facebook and my friends seemed to enjoy it too.

Keep it up!

Thank you so much for those kind words !!!

Nice post, Thanks for sharing your amazing article about Aluminium Scaffolding For Hire

Nice Post and commodity invest return after 4-5 months this is Correct.
Hotel for sale in shimla

Dear readers, after reading the Content please ask for advice and to provide constructive feedback Please Write Relevant Comment with Polite Language.Your comments inspired me to continue blogging. Your opinion much more valuable to me. Thank you.