» Investment Ideas » Investment Idea 4 : KCP Sugar & Industries Corporation Ltd.
Investment Idea 4 : KCP Sugar & Industries Corporation Ltd.
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.
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.
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.
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.
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.
Apart from this, the company owns several residential properties in Chennai & Hyderabad, which depicts company's ability to pay its debt easily.
It is now trading at P.E multiple of 9 & has corrected around 33% from its peak. However the fundamental remains intact.
The operating margin as per FY 15-16 was more than 12% which is significantly higher then its peer companies.
The stock is currently above its 20,50,200 day moving averages, currently trading comfortablly around 32 which is its 200 DMA.
Other Indicators namely ADX, MACD, ATR, RSI, MFI, OBV and Stochastics too provide bullish signals.
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.
Note : The above is just information available in public domain and therefore should not be taken as research report.
Disclosure : I personally do not have any holding in this script, Investors are advised to consult financial advisory before any Investments.
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Nice Post and commodity invest return after 4-5 months this is Correct.