Keerthi Industries

Keerthi Industries is a stock in cement space. The company is in Nalgonda district which is near to Amravati city. Company has high debt (D/E 1.8) but through financial structuring, its Interest coverage ratio is good. Also, its margins are amazing. June qtr is generally not a good quarter for Cement companies but even then it reported good sales increase compared to Mar qtr. March qtr was also very good. In June qtr, it used bigger part of profit to pay debt so profit was little less than March qtr.

Overall you will find that debt is not a problem when earning is visible. When interest coverage is already good then we are almost safe from any downside. Location is a big advantage. In that area, all companies are doing good. NCL industries is another good investment from that area.

One disadvantage of Keerthi is its low floating market cap. 75% is owned by promoters group. High ownership is assuring but this resulted in low liquidity of stock. This disadvantage cannot change.

It has given 10 times in 52 w, so currently resting but this has given a buying window for us. Even at consolidation phase, it is going up. Coming result will cement its turnaround and will be a strong trigger.

Another segment it is in is Circuit board. It got order from defense. Stock in defense is trading high. In future, if it can get another order like that then we can’t say what high valuation it can command.

It is trading at very low PE of 4. P/B ratio is high- 5. But seeing its operating margin, that is not a big deal.

Remember - before bifurcation of state, development became standstill due to protests. Govt spending became low. With that economic downturn has resulted in big loss to cement companies in that area. High power cost added worry to cement companies. Now, coal is also cheaper. Both newly formed states are big on development agenda and going good.

Overall revival in reality space will take time but in that part of India, reality and infra is state reason.
Only big thing unknown to me which can help me guage more of coming profit is utilization rate at present.

Disclosure: invested here. And NCL ind.

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I was expecting some expert feedback. But no reply till now.

Another company from that area (Talangana and AP) I have selected was Anjani Portland cement. But here debt and valuation was not very good as in Keerthi and NCL ind. Sagar cement is in radar. If it won’t gain big then I may buy that after this quarter result. HDFC sec has given coverage on Sagar Cement recently. Don’t not checked from a mouth.

Seems a decent pick. I’m from Andhra Pradesh. Given the thrust on Infrastructure and construction going on in the region of Amaravati by Govt. of AP, cement companies on the whole may see a revival in their fortunes.

I can give a better feedback once I look at the financials and study the sector. Thanks again for the pick

Cement situation in South India is not good overall. There is huge excess capacity in south India. Some numbers - National capacity is around 373 mtpa and south India has 139 mtpa and utilization level are only 48%.

Industry is embracing concerted action by competing players to keep prices high.

Have a read Outlook Article in South Cement situation

This does not look to me as a sustainable situation or sound basis for value investing.

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In south india, earlier situation was different. Now, you take any cement companies, they are improving by huge margin. In recent shareholders pattern, NCL ind has JM Financial as investor. It hold 2.2%. Hdfc sec has given funda call on Sagar cement. Check Anjani Portland also, Sales and profitability increasing by good margin compared to past.
And, about value investing, I don’t believe in life time investing. Cement is cyclical and should not be there for lifetime.
If you take, 1 -2 years time frame then you can definitely invest in those companies. A big investor has entered in India cement as well.

Another info, thought just a reference, is that value-pick has mentioned Keerthi and NCL in his fb page. I got to know about it from a reply to a comment on his blog. I don’t know what good things he said about it. I was already in both these stocks so I took that as reassurance of my selection.

Update- Nov 2 - Anjani Portland has given good quarterly number. That is also worth a look for investment. Liquidity is not a big problem there but other things are like Keerthi.

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Recent results of NCL Industries and Keerthi Industries were not that good. The reason is that cement demand has gone down in South as well in past 3-4 months.

The sale of cement in general has come down in the last three months.
There is also some volatility in the production and dispatches.
Consequently, the prices have headed south to hover around â‚ą250-280
depending on the regional markets.
Reference:
http://www.thehindubusinessline.com/news/will-the-festival-season-bring-cheer-to-cement-cos/article7823889.ece

As per the above link, we can hope of revival of cement demand this quarter. In any case, we can rest assured that there is nothing wrong with these companies. When cement demand will increase then these should gain their share. In present situation, we can say that result is not bad.

It’s there any rule for a max gain in weekly, monthly and yearly basis on BSE listed stocks? I read that news somewhere but not sure about that. Does that condition apply to Keerthi?

Update: I got that rule: http://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20150806-24
It will apply to Keerthi.

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Can u please tell about cement capacity of Keerthi Ind ?

On their website, cement capacity is written in confusing way.
On About Us page:
"Located in the Nalgonda district of Andhra Pradesh, the manufacturing facilities have an installed capacity of 297,000 MTPA cement."
http://www.keerthiindustries.com/aboutus.html

On http://www.keerthiindustries.com/cement.html
"The second phase of expansion from 900 TPD to 1600 TPD clinker and 1900 Cement grinding was successfully completed in sep 2010."

But 297,000 MTPA cement is too high figure!!!

Its just a little below .6mtpa. That makes it fairly valued, IMHO.

Well, I know smaller companies should get lower value than bigger one. But PE ratio is a company’s own price to earning so, it gain gain higher or equal PE.
I understand PE equal to 8 to 14 is not high for a profit making company. Debt is high. But its chip making for defence is also a hope. Operating Margin is very high of this company. Bigger few cement companies are commanding very high PE. So, PE = 8 or 14 will still be far lower.

Recent corrections due to China has broken it major support near 230. Now, it is showing weakness. I think one reason could be so many value pick due to corrections. Is there anything else? Hope business is doing good. Dec result is the hope.

I am hoping result at least like Sept qtr, 2015. Sept qtr is usually a bad qtr, still that much profit will make it PE go down. So, I expect good gain. If it can give results like March and June qtr which is expected then that would be a good luck for existing stockholders.

Now, it doesn’t look good stock for fresh investment seeing many stocks available at cheap valuation. But those who like completely beaten down stock can think of it now especially those who are looking from cement space.
It looks now no big investors left to sold. From two days very few sellers but still in red due to no interest of buyers. When market think of cement stocks then interest may come back.
Double from here is not big to ask when cement stocks come to limelight and market stabilize.

Keerthi industries
It got my attention because of the cement space valuavation around 5.2 l ton capacity and 4.85 l ton production in fy 17 this half year slight dip in sept qtr evn then the ebita should be around 42 cr bottom line around 16to 18 cr looks possible debt is around 65 cr low inventory and trade recievables good promoter holding so the present m.cap valuavation safety is assured.

The interesting spot is in the annual report of fy17
on the back of fresh demand for housing, urban and infrastructure development from the new states.
Cement demand in India is expected to increase due to government’s push for large infrastructure projects, leading to 45-50 million tonnes of cement needed in the next three to four years. In addition, cement production in India is expected to touch 550- 600 million tonnes (MT) in the next three to four year. Telangana is undertaking major irrigation projects and Andhra Pradesh is committed to building a new capital city by FY 2017-18 which give a major boost to cement industries in Southern India.
Your Company continues to concentrate on cost reduction measures in all areas of production and distribution to protect and improve its pro tability. Despite of few adverse conditions, your Directors are hopeful that the performance of the company would achieve another level of milestone in producing the cement.
ELECTRONIC DIVISION:
At present, the PCB industries in India, consists of single sided, double sided & multi-layered PCBs. Keerthi (Electronic Division) is engaged in manufacturing of Flexible and Rigid Flex double sided & multi-layer PCBs. The major market for our company for this division comes from the Healthcare and Defense Sectors. During the year 2016-17, the segment wise contributions to the total PCB business is as under:
Further, PCB industry is witnessing sizeable growth in the consumer electronics sector. In the coming years, the market in these segments is expected to grow around 40% to 50% as compare to the current scenario. Your company intends to reap bene ts from this growth and accordingly, the turnover of PCB business may increase further.
The improvement shown in the sales turnover of electronics division is satisfactory. Development
of prototypes for new customers in the high-end automobile segment was done during the year. The division expects to improve its customer base in the automobile segment in the years to come. Supply of PCBs for Konkurs missile program is completed for the existing requirements and development of exi cables for Invar missile program is underway. The division is exploring further opportunities in the defense sector to improve business in the near future.

See they have already supplied for defence projects and they have good experience in this field
If some one can shed some light on the PCB. development for auto sector this could become very interesting
Regards
Disl. Invested

They have printed circuit board division which looks interesting when we even at toys see Chinese chip for simple sound, etc.
But their sales is very low from many years. Why it will grow now without expansion? So, it is small and will remain so.

Disc: Not invested.

Any idea - Why the revenue dropped significantly(about 30%) in last quarter (Sep’17)

No, it is a small sugar unit. Some time they will hoard , some time they will sell.
Cement is also a small biz. Any big order in any quarter can swing result. I think we should not rely on quarterly result much but overall performance at yearly basis.

I am not tracking it from long time. I had it when I posted it. Gained too but sold later.

Disc: not invested.

Results out today. Not much to write except their interest cost is constant. Like most cement stocks, Keerthi too suffered. Atleast it is profitable.

My best was on the electronics business and infra growth leading to demand for cement. Doesn’t seem to be panning out. Also daily volume is very less since last quarter. Any inputs?

Disc: invested, tracking quantity.

The promoters just freed their pledged shares in a single shot. Also, dividend declared for the first time ever.

Good things coming finally?

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