Kanchi Karpooram Ltd


(Vinay Taparia) #1

Kanchi Karpooram Limited

CMP : 483 (As on 11th Jan 2019) Market Cap : INR 200 Cr.

Kanchi Karpooram Limited is south India’s largest producer of variety of terpene and paper chemicals. The company’s main product is camphor. Besides camphor and its derivaties, the company also produces Gum rosin and Rosin Derivatives. As per latest annual report, “the Directors find it potential to go for an increase in the capacity of production of its products as well as add few more new value added products in its list in the years to come. The market study for the new products is encouraging.” The company is undergoing major expansion plan which is expected to be completed by June 2019. The company has already acquired land for expansion. The company has already submitted expansion plan to environment clearance. http://environmentclearance.nic.in/writereaddata/Online/TOR/16_May_2018_1845028975T3IZAYRAnnexure.pdf.

Camphor prices are increasing due to higher demand and the same is reflected in financial performance of all the camphor manufacturing companies. Demand of camphor is likely to be strong. The major raw material is imported which exposes the company to forex risk. Raw Material prices have also increased. However, company is likely to pass on the increased cost to the customers due to increased demand of its products. To fund its expansion, the company has issued 222220 share warrants @ 360 each (Including premium of Rs 350 ) on preferential basis to promoters. I see it as slightly negative for retail investors as the warrants has been issued at significant discount to current market price. However, it also indicates that promoters are .confident that the changed business scenario is here to stay for long.

Financials:-

The financial performance of the company has improved significantly during last six quarters. The same is reflected in the share price of the company.

(in Cr.) Sep-18 Jun-18 Mar-18 Dec-17 Sep-17 FY 17-18
Income Statement
Revenue 54.87 46.56 34.06 30.33 29.79 117.07
Other Income 0.02 0.01 0.22 0.42 0.01 0.72
Total Income 54.89 46.58 34.28 30.75 29.80 117.79
Expenditure -42.16 -32.23 -27.32 -24.48 -23.36 -93.87
Interest -1.25 -0.23 -0.25 -0.29 -0.40 -1.45
PBDT 12.73 14.35 6.96 6.27 6.44 23.91
Depreciation -0.24 -0.23 -0.21 -0.21 -0.21 -0.85
PBT 12.49 14.12 6.74 6.06 6.23 23.07
Tax -4.39 -4.08 -2.09 -2.25 -2.21 -7.89
Net Profit 8.10 10.04 4.66 3.81 4.02 15.18
Equity 4.14 4.14 4.14 4.14 4.14 4.14
EPS 19.56 24.23 11.24 9.19 9.69 36.65
CEPS 20.13 24.79 11.75 9.70 10.20 38.69
OPM % 23.20 30.81 20.42 20.67 21.62 20.43
NPM % 14.77 21.56 13.67 12.55 13.48 12.97

Source : www.bseindis.com

Company is enjoying ROE more than 50%. Company has reduced its debt from INR 23 Cr to INR 18 Cr during first half of FY 18-19. Company’s share is presently trading at trailing PE of less than 8. There seems to be some inventory gain in June quarter resulting in abnormal jump in margins.

Shareholding:-

As on 30th Sep 2018, promoters hold 41.67% in the company. Low promoter holding is a negative point. However, the company has issued warrants to promoters on preferential basis. The promoters’ shareholding will increase to 44.64 % if all the warrants are exercised. Approx 1/3rd of public shareholding is in physical form.

Dividend:-

The Company is regularly paying dividend since FY 2012-13. Company has increased dividend payout for FY 2017-18.

S.No Financial Year Rate of Dividend Dividend Amount Per Share (Rs.)
1 2013-14 15% 1.5
2 2014-15 5% 0.5
3 2015-16 15% 1.5
4 2016-17 15% 1.5
5 2017-18 20% 2.0

Credit Rating:-

Crisil has assigned long term rating CRISIL B+/Stable with the suffix ‘ISSUER NOT COOPERATING’. Similarly, India Ratings and Acuite Ratings have shifted the company to non-cooperating category.

https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/Kanchi_Karpooram_Limited_May_14_2018_RR.html

https://www.indiaratings.co.in/PressRelease?pressReleaseID=31495&title=India-Ratings-Migrates-Kanchi-Karpooram-to-Non-Cooperating-Category

The above observation is considered very negative for and large or mid size company but for a small company, it may not be negative in all cases. Sometimes, small businesses with good credit profile do not want to spend money and efforts on review of credit rating. One should analyze the financial performance of the company before arriving at any conclusion on the above observation. Since the company is doing well, we can ignore the above credit ratings.

Summary:-

Positives

  • Well Experienced Promoters
  • Small Equity Base
  • Return on Equity @ 53%
  • Increased demand from user Industries
  • Significant expansion underway
  • Increased dividend payout
  • Comfortable leverage. Debt equity ratio is 0.33 as on 30th Sep 19
  • Share price trading at PE less than 8
  • Plant strategically located near Chennai seaport

Negatives :

  • Low Promoters’ Shareholding
  • Share already moved up during last one year.
  • Major raw material is imported. Any major depreciation in currency may lead to increase in input cost.
  • Low Liquid Share

Disclosure :- invested.


(Lokesh) #3

Mangalam Organics is in same field as Kanchi Karpooram. As for why the Camphor prices are going up, the thread in Mangalam organics has interesting discussion.


(Vivek Gautam) #8

I hold small qty of Kanchi Karpooram since its ipo in 90s when it was listed only at MSE.unlike 100s of cos which melted away after collecting money thru ipos Kanchi still is growing after clearing 15 years thump rule is a positive sign . Other cos of similar track record of coming with ipos n still r listed n growing hv created big wealth like Avanti Feeds Bharat Rasayan Caplin Point n so many others. Further regular dividend cheque were received. Seems promoter quality is good which is a big essential for me.

Next sector needs to be tracked which seems to have tailwinds may be due to China factor or what ? Kanchi location close to a port gives it an edge as it allows it to import RM easily n south india being much more religious gives it a big captive market n pricing power. Stock needs to be tracked closely inspite of it having created huge wealth in last 3 odd years after getting listed at Bse


(Vinay Taparia) #9

https://www.bseindia.com/corporates/anndet_new.aspx?newsid=d615d081-69ad-4d6d-9537-5aa58f11aa11


(Vinay Taparia) #11

User industries (Paper, Pharma, Paint, tyre etc) are doing well so their will be enough demand. This is evident from the undergoing expansion plan. Please visit Mangalam Organics Thread for details. vast and very useful discussion is available there


(Prasadkumaresan) #16

Why should a small company co operate to rating agencies and pay them sir. The company is so confident of selling all its produce without any delay and their repayment cycle is lesser than a month. My 2 cents only


(Hitesh Patel) #18

Guys active on this thread please note that there are a lot of 1-2 liner posts which dont add any value to the discussion. Please refrain from such posts or we will have to suspend membership of those members who litter the thread with useless comments.