KCP Sugar- The Beneficiary of Government Reforms

Origin
KCP
Sugar
and
Industries Corporation
Limited is one of the
leading players in the
sugar sector. The
company
currently
has
a
market
capitalization
of
Rs.396.85 crores.

The Market
India is the second largest producer of sugar after Brazil.

In order to keep a check on prices and to avoid speculation in a year where there is an
expected shortfall, the Indian Government has asked the SEBI to ban futures trading in
sugar. This is the second agri-commodity to be banned (after Channa) since the SEBI
became the commodity regulator in September last year.

The Indian Sugar Mills Association (ISMA) has estimated a 7.3% fall in national sugar
output to 23.26 millions in comparison to the previous year.

The government has asked the sugar companies to release stock in the market to
reduce prices from the Rs.40-42 range to Rs.35-36. However, this stance will not allow
to keep stocks to meet future expected shortages which may have a detrimental
impact.

An estimate says that there were around 99 cooperative sugar factories in 2015-16 out
of which only about 30-40 are to begin the sugarcane crushing this season due to raw
sugarcane shortage. These have received loans worth Rs.3273 crores and

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installments on these amounting to Rs.1000 crores remain unpaid. These factories

may turn into NPAs.
The various decisions taken by the government includes relaxing the mandatory sugar export
rule whereby taxes will now be applied on the actual exports rather than estimated and a 20%
export duty to maintain domestic supply in conditions of drought.

Financials
The Q1 FY 2017 reported that net sales have fallen from Rs.189.90 crores to
Rs.112.70 crores.

The company has still shown a rise in PAT from Rs.7.25 crores to Rs.10.96 crores
which can be attributed to a huge decline in the consumption of raw materials and
other expenses.

The EPS has shown an increasing trend and has recovered from a negative

1.93 in the last years first quarter to a positive 0.93 in this years first quarter. Also, the
EPS has shown a 51% rise from the previous quarter rising from 0.64 to 0.97.

The promoters holding stood at 40.23%, while Institutions and Non-Institutions were
holding 0.08% and 59.69% respectively.

KCP Sugar share price made a recent high of Rs. 46.00 and closed today at Rs. 34.55 at a
P/E of 9.62. The market capitalization of the stock is Rs. 399.12 crore. The stock has given
correction of 25% from recent high of 46 and is available at a good support of 34. We
recommend a Buy in KCP Sugar at current levels with a target of 44.

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Disclaimer
The investment advice or guidance provided by way of recommendations, reports or other ways
are solely the personal views of the research team. Users are advised to use the data for the
purpose of information and rely on their own judgment while making investment decision.
Dynamic Equities Pvt. Ltd - SEBI Investment Advisory Reg. No.: INA300002022
Disclosure
Dynamic Equities Pvt. Ltd. is a member of NSE, BSE, MCX SX and a DP with NSDL & CDSL. It is also
engaged in Investment Advisory Services and Portfolio Management Services. Dynamic
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Answers to the Best of our knowledge and belief of Dynamic/ its Associates/ Research Analyst:
DYNAMIC/its Associates/ Research Analyst/ his Relative:

Do not have any financial interest / any actual/beneficial ownership in the subject
company.

Do not have any other material conflict of interest at the time of publication of the
research report

Have not received any compensation from the subject company in the past twelve months

Have not managed or co-managed public offering of securities for the subject company.

Have not received any compensation for brokerage services or any products / services or
any compensation or other benefits from the subject company, nor engaged in market
making activity for the subject company

Have not served as an officer, director or employee of the subject company

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