Shivam Cement (SHIVM) has been hitting positive circuit for the past two days, and is likely to hit circuit tomorrow too given the size of market demand for SHIVM scrip. The scrip has hit circuit for two days, but if we look closely, the price has been rising for quite some time now. This can be seen from the following graph.
*Picture taken from SSpro.
As seen in the graph above, the LTP of SHIVM was Rs 307 as on April 24, 2019 and it’s LTP today (May 14, 2019)is Rs 546. Thus in a period of 14 trading days, the price of SHIVM has risen by 77.8%.
*Picture taken from SSpro.
In this period, a total of 13.78 lakh shares of SHIVM has been traded with the weighted average price of Rs 415.23. The top buyer and seller brokers of SHIVM in this period (April 24 to May 14) are listed below:
|Top 10 Buyers
||Avg. Buying Price (Rs.)
Top 10 Sellers
||Avg. Selling Price (Rs.)
*Table taken from SSpro.
About the company
Shivam cements was founded in the year 2003. It began commercial production from the year 2011 and is the largest manufacturing Greenfield project in Nepal. It is currently producing 3000 TPD cement and 1900 TPD (Tones per Day) clinker from the company’s self-owned limestone quarries. With a broad vision of business, Shivam Cement Private Limited was converted into Public Limited Company in the year 2015 to provide its customers and the stakeholders to be a part of the company.
Shivam Cement Limited also holds 88% shares in Shivam Holding Private Limited which in turn holds 30% stake in Hongshi Shivam Cement Pvt. Ltd. (HSCPL), a JV with Hongshi Group of China which has set up a cement plant with grinding capacity and clinker capacity of 6000 TPD, whose commercial production has started from Jestha 2, 2075.
The authorized capital of the company is Rs.7 arba while the issued capital is Rs.4.4 arba .
Though Shivam Cement falls under the Manufacturing and Production index, it is the first cement producing firm to be listed on the stock market. Due to the absence of any direct competitor in the stock market, the company is likely to make most of first mover’s advantage and attract a considerable cluster of both individual and institutional investors.
Overview of entry into capital market
Shivam Cement had issued Initial public offering (IPO) for project affected locals and general public at a premium price. The company had issued 10% for general public and 2% for locals. However, since the issue was floated at a premium price, it got undersubscribed and took multiple phases to be fully subscribed.
The company had issued 10% of the issued capital i.e. 44 lakh unit shares to the general public at Rs 300 per unit (Rs 200 premium added on Rs 100 face value per share). Out of the total issuance, 2,20,000 units had been separated for the Employees of associated organizations and another 2,20,000 units for the different Mutual Funds scheme.
However, only 60,000 shares have been allotted by the mutual funds. So the remaining (44 lakh units – 60 thousand units allotted to different mutual fund schemes + 94695 units undersubscribed by project affected people) 44,34,695 lakh units was issued for the general public at Rs 300 per unit.
Reasons for price hike
Since the issue was only 12% of the company's capital size, the number of shares is not that huge. In addition to that, the shares subscribed by the project affected locals aren't tradable as of yet due to the lock-in period. Therefore, the number of floated shares is only 10% of the capital which implies low supply of shares.
The shares of SHIVM was listed in NEPSE on March 19, 2019
So, due to low supply and high demand of SHIVM shares in NEPSE could be the first reason for positive circuit hit by Shivam Cement's shares.
Similarly, the second reason is the company's performance as per the third quarter report of FY 2075/76. As per the report, the net profit has increased by 13.06% percent in the third quarter of the current FY 2075/76 to Rs 1.05 arba in the third quarter of fiscal year 2075/76 from Rs 93.66 crore in the corresponding quarter of the previous fiscal year 2074/75.
Similarly, it has made regular income from operation of Rs 8.37 arba by the end of the third quarter rising from Rs 7.10 arba in the corresponding quarter. The revenue from operation rises by 17.82% in Q3. Similarly, the cost of sales rises by 17.13% to Rs 5.37 arba.
Its retained earnings amounts to Rs 3.45 arba till the third quarter and has Rs 94.02 crore as share premium. Its current paid up capital stands at Rs 4.4 arba. Its annualized EPS stands at Rs 32.09 and net worth per share is at Rs 199.88 and its quarter end PE stands at 9.53 times and the current PE is almost 17 times.
These indicate a more than fair Earning per share with least possible PE ratio. This is a very lucrative investment opportunity, and as evident from the market situation, the buyers are trying to collect shares form the market.
The final reason maybe because the existing shareholders are trying to corner more shares. During the IPO issuance, the issue wasn't oversubscribed by much, so the allotted individuals got as high as 5,640 units. Thus, now as they are seeing that the company is doing well they may be trying to corner more shares.