Financial Analysis of Shivam Cements; Is it worth a buy at current price ???

March 31, 2019 | Investopaper

Shivam Cements became the first cement factory to issue the Initial Public Offering (IPO) and get listed in NEPSE. The company issued 5,49,640 and 41,20,000 shares to the locals and the general public at a premium price of Rs. 200 and Rs. 300 respectively. Currently, Shivam Cements is trading at Rs. 333 per share in the secondary market. Recently, the company has declared 15.7895 percent cash dividend to the shareholders from the profit of F.Y. 2075/76. Shivam Cements has also published the notice regarding the upcoming Annual General Meeting (AGM).

The investors who purchased the shares in the IPO at Rs. 300 per share may be wondering whether the price will go below their purchase price. On the other hand, many investors are waiting for the price to decline so they can purchase at lower than the IPO price. No one can predict what will be the direction of the share price of Shivam Cements Ltd in coming days with certainty.

Here, we have tried to analyze the fundamentals of the company. Based on the fundamentals, it is the investor’s responsibility to decide whether the company is worth buying at current levels or not. Is it wise to sell the shares at the current price? See the financial performance of the company and decide for yourself.

Shivam Cements Limited: Last 5 Years

Headings 2074/75 2073/74 2072/73 2071/72 2070/71
Paid up Capital (Rs.Arab) 3.87 2.5 2 1.25 1.25
Reserve & Surplus (Rs.Arab) 2.39 1.49 0.89 0.24 -0.17
Gross Profit (Rs.Arab) 3.45 2.46 2.03 1.42 1.11
Net Profit (Rs.crores) 114.33 81.14 77.78 41.53 10.81
Earnings Per Share(Rs.) 29.53 32.46 38.89 33.22 8.65
Net Worth Per Share (Rs.) 161.76 159.6 144.5 119.2 86.4

During the last five years, the company has gradually increased its capital from Rs. 125 crores to Rs. 387 crores in 2074/75 and currently Rs. 440 crores after the issuance of IPO. With the rise in the capital, the net profit has also risen from Rs. 10.81 crores to Rs. 114.33 crores in five years.

Shivam Cements Limited: Second quarter, F.Y. 2075/76

In the second quarter of F.Y. 2075/76, Shivam Cements has made a net profit of Rs. 65.79, a rise by 20 percent from the corresponding quarter previous year. The company made Rs. 54.69 crores net profit in the second quarter last year. The reserve and surplus have also increased to Rs. 3.04 Arab from Rs. 1.78 Arab last year.

Headings 2nd Quarter, 2075/76 2nd Quarter, 2074/75 Percent change
Paid up Capital (Rs.) 3.89 Arab 3.63 Arab 7.16
Reserve & Surplus (Rs.) 3.04 Arab 1.78 Arab 70.79
Gross Profit (Rs.) 1.87 Arab 1.51 Arab 23.84
Net Profit (Rs.) 65.79 Crores 54.69 Crores 20.3
Earnings Per Share(Rs.) 33.81 30.09 12.36
Net Worth Per Share (Rs.) 179.22 148.84 20.41
Price, March 28 (Rs.) 333
P/E Ratio*11.14

* Annualized Earnings Per Share (EPS) is 29.90 which is calculated on Capital of Rs. 4.40 Arab after the issue of IPO.

Projected Growth of Shivam Cements Limited

The projection of growth made by the company itself shows that the gross and net profit will steadily rise in the coming fiscal years. The net profit is projected to grow by 38 percent in 2076/77 to Rs. 185 crores. Likewise, in 2077/78, the profit will rise to Rs. 210 crores, a rise of 13.50 percent from the previous year. With the rise in net profit and constant capital, the earnings per share (EPS) is expected to rise to 30.37 and 42.08 in 2076/77 and 2077/78 respectively.

Headings 2075/76 2076/77 2077/78
Paid up Capital (Rs.Arab) 4.4 4.4 4.4
Reserve & Surplus (Rs.Arab) 4.11 5.3 6.53
Gross Profit (Rs.Arab) 3.69 4.24 4.56
Net Profit  (Rs.Arab) 1.34 1.85 2.1
Earnings Per Share(Rs.) 29.53 30.37 42.08
Net Worth Per Share (Rs.) 193.41 220.45 248.41
Return On Equity, ROE(%) 18.27 17.72 21.2
Return On Assets. ROA(%) 8.96 10.62 14.38

Past Dividend & Expected dividend of Shivam Cements Limited

Shivam Cements Ltd. has recently declared 15.7895 percent cash dividend from the profit of Rs. 2074/75. The declaration has matched the projected dividend. If we assume the projection to be met in the future, we can expect that the shareholders will receive only cash dividend till the F.Y. 2077/78. Since there is no increment in the projected capital in coming years, shareholders may not receive bonus shares.

Fiscal Year Actual cash dividend(%) Fiscal Year Projected Dividend (%)
2072/73 10.53 2075/76 15 (declared)
2073/74 10.53 2076/77 20
2074/75 15 2077/78 20

The company has provided a dividend to the shareholders consistently in last 4 years (including this year’s dividend). However, the projected cash dividend of 20 percent in the next 2 years gives a dividend yield of 6 percent. This is way below the returns achieved on fixed deposits or debentures. The fixed deposits on banks pay an annual interest rate of more than 9 percent. Likewise, the return from debentures issued by several banks is above 10 percent. For current income generation, purchasing Shivam Cements at the price of Rs. 333 per share may not be optimal. However, for growth investors, the share of Shivam Cements may appeal.


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