The Burning Issue “Is Shivam Cement even comparable to Unilever Nepal, Bottlers of Nepal, Himalayan Distillery and other high-priced manufacturing companies stock?”

-Ketan Bohara

The Burning Issue for now in the Nepal stock market is Shivam Cement and its increasing price every other day. Hitting positive circuit for third time now and 90.67% rise in its price just in 16 trading days has led people to compare it with the high-priced manufacturing Companies' stocks like Unilever Nepal, Bottlers of Nepal and Himalayan Distillery.

The question is “Isn't it too early to compare it with companies that have been leading from years?” Let’s check it out statistically first.

Comparative Analysis

Unilever Nepal (UNL) 

 Bottlers Nepal (Terai) limited (BNT)

 Shivam Cemenet (SHIVM)

The simple understanding from the above table could be “Higher the number of shareholders, lower the return to the shareholder” (supposing equal amount of profit for all organization). And return is what we, as investors, look for. Thus, according to statistics Shivam cement is no way near other companies in the list.

Now if we see it through the perspective of a long term investment, can we expect Shivam Cement to be in the most leading stocks in coming years or a decade?

In context of cement industries in Nepal, it has nearly met its requirement of cement given the intense competition and huge number of cement manufacturers. Although, we already know there are many cement industries yet to be established, just 2 years back Nepal was importing 55% of the total cement and now we are self-sufficient, so we won't have to import any more.

So, for Shivam cement, given the domestic market's growth rate, it will be very difficult to increase its sales more than 500% (which would be a predicted growth for providing good return to shareholders).So only thing for shivam cement to meet its shareholder needs being the most leading stock in the market even after a decade could be a high quantity of export.

Now let’s see what could be the reasons for hike in share price of Shivam cement then?

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%  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.

These were some of the positive reasons,but the things which should be cared about could be;

Watching in the floorsheet, doubt arises.

The most of the Shivm’s share were traded by broker no 58. After increasing market other brokers were also seen trading shivam cement but most of all is done itself by broker no 58. Sandip jalan’s (ex director of NASA securities which is broker no 58), wife Alka Goel is one of the director of shivam cements from the public share side. The most trading broker and its relation with the directors just maybe the coincidence or is it?

These might be some of the information which would help investors to know, think and then invest rather than following just the trend.