See 200% upside in KCP, says Rajen Shah

Shah told CNBC-TV18, "KCP is a 70 year old company but has maintained a very low profile. It has rarely been talked about on the media. It’s not a fancied one and hence very under owned. This is basically a Rs 800 crore company based in Chennai and it is into about three-four businesses. One is the heavy engineering and the founder business, the second is the cement business, the third is the sugar business, which KCP has a subsidiary in Vietnam which makes sugar and the fourth and a small business is the hydel power unit and the thermal power unit and maybe a little bit of wind power also."

He further added, "What has happened over the past two years is that the company’s management has increased the capacity of almost all its businesses and pumped in quite a substantial amount into all these businesses to modernize the units and increase the capacity. They spent almost Rs 76 crore in modernizing the heavy engineering unit and increasing the capacity of the founder business, about Rs 250 crore for increasing the cement capacity, the total capacity now stands at about 2.2 million tonne and roughly about Rs 50 crore for increasing the sugar capacity from 5000 TCD per day to about 6000."

"Now what is going to happen next year - all these businesses are likely to contribute significantly to topline and bottomline. We at Angel Broking are expecting this company to report almost about Rs 8 kind of earnings for next year. Last year it reported about Rs 5.9. This year we are expecting about Rs 6.5 or so but next year it should be about Rs 8 kind of earnings."

"The stock is currently quoting at about Rs 26-27, so it is quoting at about 3.5 times the earnings. 3.5 for this company sound too low actually especially in lieu of the fact that this company declares about 100% dividend. In fact it has been declaring 100% dividend for the past five years. So that dividend yield itself works out to almost about 4% tax free. So, that is one of the reasons why we believe that the stock is highly compelling and highly cheap actually."

"The company has got some land assets in Hyderabad, Chennai. It is basically going to make this land to use actually. In fact at Hyderabad they own about six-seven acres and they are setting up a 130 room four star property and talks are already on. In fact the construction has already begun and the talks are on with a leading international hospitality chain for managing this property. So the company will be getting a fixed income 2013-14 onwards - that’s what we believe."

"This stock basically has about 200% kind of upside if you got a patience of about 24 months. In fact the downside even in the last weakness in the market when the Sensex came down to 15,200 - the stock had gone down to just about Rs 24. So I think the downside is 10% and the upside could be as high as about 200% in about 24 months."