Shri Keshav Cements & Infra (Katwa Udyog Ltd.) – Cementing Your Portfolio !!!

Background: Cement is the basic infrastructure element and an investor who believes in the India’s infrastructure story should surely consider investing in the Cement sector which is a direct proxy to it. Although the sector is well researched, it still has some very interesting ideas left undiscovered and Shri Keshav Cement & Infra (Formerly known as Katwa Udyog) is one of them. The company is one of the most profitable cement companies in india backed by a very capable and intelligent management. Company has two brands namely, “Jyoti” and “Keshav” and is based in south india supplying mainly to Karnataka, Maharashtra and Goa (within 100km of its Cement Plants).

The Company: Shri Keshav Cements (previously knows as Katwa Udyog) was started by Mr. H D Katwa in 1984 by setting up a small cement plant with a capacity of 30 TPD (Tonnes per day) which is now increased to 3000 TPD. The company had last year taken a capex to expand the capacity by three times and this capacity would come onstream by end of this year. The story of this evolution is very inspiring and promising for the shareholders. The promoters have always been conscious of doing business “profitably” and therefore, they have also made some quality investments which bore fruits thanks to Management’s superior operational excellence. The simple strategy was to take up ailing cement plants and turn them around -which they did. Shri Keshav Cements took over the ailing – Sangam Cements from KSFC and Shri Quality Cements Ltd from IDBI and turned around those sick units into profitable entities and its noteworthy, that Shri Keshav Cements boasts about one of the best Operating parameters in the industry. The company is also in plans to have its own solar power unit to rationalize the power cost – details of which shall be known in the next couple of months (and should be online in next couple of years).

The company’s revenues, in last five financial years have grown from 22.36cr 50.96 cr whereas the bottomline grew from 1.14cr to 2.9cr during the same period. The company’s debt has reduced by 1/3rd during the same period and this is despite of sector tailwinds and takeover of loss making sick Cement plants. This gives tremendous credibility to the management’s operational pedigree. Turning around not one, but two sick cement companies at a time when the infrastructure activity was at its lowest, reducing debt etc is great testimony of management’s capability. Company has also paid dividends, whenever distributing wealth to shareholders has made more sense than capex. I believe this is the most judicious way of using shareholder money. Shareholder wealth is increased by improving business prospects of company and not by distributing dividends. The promoter holding has also increased to more than 67.8% in the last few years (without any pledge), by way of creeping acquisition. To back this all, the economic activity has also started to look up, especially in the Roads construction where 13km/day of roads are now being built as compared to mere 3km/day till last year. This is eventually going to go upto 20km/day. Furthermore, government moving to kick-start the stalled projects, along with new capex, the Cement demand is set to move up further.

Significant Notes:

  1. More than three times present capacity coming on-stream by end of this year.
  2. One of the best Operating Margins in the Industry.
  3. Excellent Cash generation.
  4. Significant reduction is debt in the past few years and very comfortable Interest Coverage Ratio.
  5. Promoter holding increased from 56% to present 67.81% without any pledge.
  6. Power Plant to bring in more cost savings which could further increase OPMs.
  7. Good return ratios and efficiency parameters.
  8. Very good Management

Valuation: The stock which has one of the highest Operating margins in the industry, is available dirt cheap at just trailing 7.5 PE, whereas most small sized cement companies trade in the 20s PE and the biggest ones trade at much higher valuation. The company has a very healthy interest coverage ratio. One very important point to note is the Zero Contingent liabilities. This is very rare in any company and therefore, very healthy. The company has superb cash flows and again, this is very significant given that they had acquired and turned around heavily loss making companies.

Technicals: The stock was oscillating in a very small range for almost an entire decade (which is very rare) and recently broke out of that range. This is a life altering breakout for the stock. This is evident as every small consolidation is bought. Combined with the extreme cheap valuations, the breakout, the re-rating and expected exponential increase in topline and bottomline, it can create tremendous wealth in the coming times for the shareholder.

The company is on path to tremendous earnings growth and given that it has one of the best operating parameters in the industry, this earnings growth would cause significant bottomline growth. The company is steered by a very capable, profit conscious management which has proved its business and financial acumen. The company has been improving its performance metrics every year with reduced debt and excellent cash generation. Backing all these fundamentals is a superb technical picture. Given the massive breakout of a very short trading range of around a decade, the stock should go up multiple folds in the times to come.

God Bless !!!

Disclaimer: It is safe to assume that I may have some vested interests in the stock. Also, the above stock view is my personal view in individual capacity. For rest, please look at the About page.

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151 Responses to Shri Keshav Cements & Infra (Katwa Udyog Ltd.) – Cementing Your Portfolio !!!

  1. Akshay says:

    will start researching it.

  2. KK says:

    Thank you Ace, I looked up for the company in MC but couldn’t find it.

  3. pavans13 says:

    Thanks Ace. Will research it. On BSE and MoneyControl its Katwa Udyog.

  4. Praveen Rao says:

    Thanks for the pick ACE….

  5. Niraj Bhagtani says:

    Hi Ace,

    Please look at the below Statics for Keshav Cements

    Total Share Capital 5.12
    Net Worth 14.19
    Total Debt 39.94
    Net Block 43.49
    Investments 0.00
    Total Assets 54.13

    Total Debt is too High … Don’t you think it is highly leveraged ?

  6. Rajiv says:

    Can I ask you a question Ace… pls dont take any offence.. I have been following your blog for almost six months now.. with no investments made by me so far… all the time you recommend a stock… it has always run up by almost 50% – 100% before you have recommended it… can you assign a reason why…

    • 1. good that you have not made any investments suggested here. pls dont do it either.
      2. any stock which is not at 52 week low is mathematically appreciated anything from 1%-10000%…. so if there’s a stock which is not at its 52 week low, has theoretically appreciated.
      3. Again, dont buy. ignore. stay blessed because your investment theory is clearly different from mine …also i am not asking anyone to buy or sell just giving my views…if not interested then refrain…simple..

  7. vicky says:

    When expansion complete…has civil work started

  8. Rohit Gulati says:

    Thanks for the Stock Idea….will study and get back,looks grt with huge potential on back of capacity expansion just like Prima and Vidhi

    • remember the story is not just about earnings growth but also re-rating

      • sridhar says:

        Hi ACe , I believe we have over supply cement in market. Could u please advise why do u think this sector will be re-rated. I believe commodities in general can be re-rated only one the sector picks up irrespective how great the company is. Ur inputs is appreciated.

        • this is not a pure commodity. the cement is an element which is very regional so saying it is excess capacity depends from region to region…comparing it with commodity companies is not fair…look at what ultratech has done for its investors in last 10 yrs and what tata steel has done

          • sridhar says:

            Cool . Thanks for differentiating to understand among different companies even-though they do in the same sector.

  9. Jatin Kalra says:

    FY15 eps is 6.5 rs. At cmp of 50-51, its trading at 7.5-8 times ttm earnings & not 5.5 times.

  10. himanshu says:

    sir any lastest view on bgr energy . though the sector started turning around.

  11. vimal says:

    Hi, ur view on Panoromic universal, Megasoft, and Allied digital services?

  12. rahul says:

    Dude you are not registered with SEBI as a Research Analyst .. How come you are posting ideas ?? Other bloggers have stopped it .. SEBI might ban you and yours families / associates account ??

    • 🙂 thanks for opening my eyes.. now pls open your and read the disclaimer and SEBI rules regarding this. and pls stop worrying about me and my family .. God Bless….

      • Praveen Rao says:


      • rahul says:

        No seriuosuly are not Registered as an Analyst and Publishing on a Public Platform which in turn can lead to Speculation in the concerned Securities .
        Many Bloggers like AyushMittal ( Valuepick and many twitter handles have stopped Giving a recommendation on stocks .

        I have no issues with You posting ideas
        . if it starts with everyone I will be more glad as it makes one more confident to read more on small caps and midcaps and the understand the way of analyzing a stock🙂

        God Bless

        • even if you or anyone have issues with me posting ideas, i am not really bothered . clearly you are not aware of the rules. I am. Also if someone else is not aware of the rules, i dont care too. by stopping to give recommendations it does not mean you are in compliance. even if you say anything about stock you need that registration. anyways, i have better things to do in life than to continue this meaningless conversation which i have had with so many blokes on this blog and emails too.

    • ekbechara says:

      you and others should know that its not just posting ideas, but also giving opinions about the stock – infact even discussing stocks comes under the gamut of these regulations…so if a blogger is saying that he wont recommend shares because he is not registered but he is giving opinions saying this share is good or that share’s promoters bought shares from markets, then also he is supposed to be registered. its calling double standards.

  13. Jitendra says:


    I am not getting your email for this new idea.


  14. techiechartist says:

    hi sir… this stock is looking excellent on all time frames… this will easily be in triple digits in a couple of months… by the way sir, as i said last month vidhi did give 80% returns from that date…feels really good…

  15. hardyboy says:

    if u add up quarterly results eps is 8.5 but in their pdf for mar result on bse annual result eps is can company do such mistake.i mean bse is authority and i am quoting company own document

  16. Praveen Rao says:

    I was trying to place buy order of katwa during After Hour session, but was getting error in sharekhan like “Alert !!! In Group Scrip Buy not allowed”….Don’t know why….

  17. Pranav says:

    Hi Ace, if you see the corporate result announced on BSE for 31 March’15, they have considered tax expenses in YTD March’15 numbers and not in the quarterly number for March’15, therefore the confusion in EPS numbers. EPS for FY 14-15 should be Rs. 6.53. Rgs.

  18. Praveen Rao says:

    ACE it seems that this scrip is not in B group now.Whether this scrip for degraded from B category last week.?

  19. Ramesh Patel says:

    Ace sir,
    kudos for finding out such a gem stock !
    Sir, I have one very imp question for u. You have been coming out with great stock ideas, almost all of them performing upto the expectations which implies very high success ratio for u. But in spite of all these several times u have mentioned that stock market is not your bread and butter !!
    Why so sir ?? Is it because of the nature of the beast (highly volatile and often unpredictable and considered risky ??) Is it due to high possibilities of loosing the fortunes in markets sir ?
    Asking this just because off late I have been seriously thinking of making investment/trading as my bread & butter. Please enlighten sir !

    • see, markets are my passion and i am not in the business of trading or investing or PM services professionally. My bread and butter is a totally different line…and i also love what i do professionally…. also i dont see volatility…where people see volatility, i see opportunity to make money – both sides (as a trader)… and for someone who has seen so many bubbles, nothing can scare me… also with god’s grace i think now i am at a stage where money would work for me and my professional commitment is more driven by my love for my profession….that’s all…. and to be honest, there no reason why someone could not make money trading professionally… i am one of those guys who believe you can make a lot of money in the markets if you stay grounded…. for a trader volatility is a friend not foe… so if you want to take up trading professionally and you think you have the skills then why not?… there’s always money to be made in the markets….some by investment and some by trading… all you need is a sound eye for opportunity and god’s grace (which is needed in everything by default)…. Best of luck in your endeavor … God Bless !!!

  20. healingtouch says:

    Filing done by company on bse yesteday evening showing shows ePs of 6.5 for 2015 how are so sure please see bse site latest information filed by company yesterday evening.

  21. Suneetha says:

    Thanks a ton Aceji for your Selfless service ! Thanks for this Great pick !

  22. Suneetha says:

    Thanks a ton aceji for this Great pick !

  23. Praveen Rao says:

    Cybertech smart move…up by 20%

  24. Akshay says:

    Cybertech and arogranite shown a good move, both hit UC..congrats!!!

  25. srinivas says:

    ACE, nice to see huge movement in Aro granite and cybertech today…even waterbase, v2 retail, cupid are on fire..

  26. Krish says:

    Hello Ace, Although debt means long term debt, I couldn’t ignore the fact the short term debt has steadily raised for the past 5 years.

    ST Debt & Curr. Portion LT Debt (in millions) 321.46 330.28 290.81 86.54 80.10

    Any logic behind why it is going up and what is the downside of it going up ?

  27. Praveen Rao says:

    V2 and Cybertech both stellar movement…super!

  28. Uzma says:

    Can one buy Mangalam drugs and Gujarat Themis Biosyn at CMP???

  29. Praveen Rao says:

    One of my comment is awaiting for your moderation…..Is that offensive🙂

  30. philip says:

    Dear Ace, Thanks for all the good things!! Nothing more to say. God bless you and your family with all the great things. sincerely. Philip& family.

  31. Niraj Bhagtani says:

    Hi Ace,

    what are your views on Shemaroo Entertainment ?

  32. RAVI says:

    Sir, I think there has been a typing mistake in capacity i.e 3000 TPD to 1.1 Million TPD means approximate 366 times form its current capacity….i think the present capacity should be 300000 TPD.

  33. Ra Da says:

    Though I am not very good at technicals but consecutive 2nd day closing above 73 is signalling a big break out for Prima. What are your thoughts?

  34. indianbull10 says:

    Ace, V2🙂

  35. Vinod says:

    Thank you Ace,
    Vidhi doubled from my buying price today.

  36. anil says:

    ur view on kama holding. its having 53 pc in srf which is valued around 4000 cr wheras market cap od kama is just 800 cr

  37. WisdomSeeker says:

    Sir,your views on Blue Chip textiles and Deepak Spinners ?

  38. vasim says:

    Thanks Ace,

    Do you really input figures from Annual report in your modelling or is there someway we can get accurate numbers in Excel?


  39. Manoj says:

    Hi Sir,

    From the next day of this post .. This scrip is continuously in upper circuit . No chance of anybody to enter from three days ??

    Already appreciated by 15 % in three days… Any chance that the circuit might open ??


  40. llivi78 says:

    Please add my email id

  41. Vivek Gupta says:

    Hello Ace Sir,

    A proposal to merge Katwa Construction with Shri Keshav Cements is under way.
    Mentioned on their site.


    • yup i know, but so far nothing concrete has been done as far as i know. but once it is done, it would be another positive for the company, though katwa construction is a small entity in its space

  42. uma says:

    hi ace..

    what are u r top picks from this blog..just need u r opinion..
    i have exposure in PRIMA,VIDHI,CUPID,V2,KATWA.,liberty..
    are these good enough for core holding..just i am having 2% in each of above..just give u r thoughts..

  43. Uma says:

    thanks Ace..for the reply..

    I am in dilema..wether to add any other new stock from this blog..or just to add into above stocks..
    what is u r suggestion….if its new stock to be added..which one u suggest to add from this blog..

    • you should invest in the companies that you understand and have conviction in. So i guess your conviction is in those stocks that you have mentioned so you could invest in those stocks only

  44. Satya says:

    Hello ACE,
    Can you please help me find out – How to get the info from company website/notification etc about the Capacity increase by year end?

  45. abhishek says:

    Hi Ace, have scrolled through the whole communication but didn’t find the relevant answer…. The increase in capacity to 3000TPD they are talking from 2008 ( ref. the group profile & browser on keshavcements website) . So what has happened during these last 6 years from 2008 to 2014. Also, what is their current capacity ? From the sources I could gather , its 600 TPD ( after acquisition of Lohgar plant) , even from the reverse calculation of 50 crore revenue & avg price 3500 per tonne, it comes out to be around 400 TPD ( which could actually be 600 TPD if including idle capacity & underutilisation etc. ) . So even if they increase the capacity 3 times, the capapcity will reach to only 1500-1800 TPD. How the figure of 3000 TPD stacking up ? Also, I couldn’t see any new borrowings or any capital work in progress in BS ? How are they doing this expansion- you mentioned possible right issue – but does that mean they have taken up the capex without even tying up the funding ? You clarity will help a lot in deciding about this investment.

  46. krpardeshi says:

    Unable to google up your opinion on Duke Offshore either

  47. Jitendra says:

    I have manage some funds, I want ur guidance. I want to enter in any one scrip between Katwa Udyog, Asso. Stones & Guj. Themis, kindly guide me, in which I should go. Pl reply ur reply will help me a lot.

  48. sachin shetty says:

    Hi, Ace investor could u pl tell me how much revenue and profit is expected once the expansion of Keshav cement is completed. 1 Million per tonn means how much market capital is expected.

  49. abhishek says:

    HI Ace, the starting line of you write up says that “Shri Keshav Cements (previously knows as Katwa Udyog) was started by Mr. H D Katwa in 1984 by setting up a small cement plant with a capacity of 30 TPD (Tonnes per day) which is now increased to 3000 TPD” . Don’t know if its a typo, but it is factually incorrect – just for your information, you dont have to publish this. The company did expanded its capacity to three time but that is from 300 to 900 TPD. They want to raise it to 3000 TPD over coming years and have aggressive plans afoot, Infact trying to secure funding too for the same, but the increased capacity of 1Mn ( or 3000 TPD) is still 3-4 years away !!! You can verify the same with management.

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