KAPCH (Kapchorua Tea Kenya) — Investor Analysis & Recommendation

Kapchorua Tea delivered a strong half-year performance (to 30 Sept 2025) with healthy profits, excellent cash generation, and a very solid balance sheet. It remains one of the better agricultural/value stocks on the NSE.

Below is the full breakdown in simple language:

1. PROFITABILITY (Short-Term Strength Despite Lower Turnover)

KAPCH posted:

• Turnover: KSh 829.8M (lower than KSh 1.094B last year)
• Profit before tax: KSh 136.8M (much higher than KSh 27.2M)
• Net profit: KSh 95.18M (vs KSh 18.23M)
• Earnings per share: KSh 12.17 (vs KSh 2.33)

Even though revenue dropped, profit surged due to:

• Better margins
• Cost control
• Fair value gains on biological assets

Conclusion: Revenue dipped, but profits improved sharply — strong operational recovery.

2. BALANCE SHEET & LIQUIDITY (VERY STRONG)

Key numbers:

• Total assets: KSh 2.71B
• Shareholders' equity: KSh 1.998B
• Cash and bank: KSh 749.9M
• Biological assets: KSh 489.6M
• Low short-term liabilities

Conclusion: Extremely healthy balance sheet, large cash buffer, and very low debt exposure. No solvency concerns.

3. WHY PROFITS IMPROVED

• Fair value gains: ~KSh 39.9M
• Better operating profit
• Strong cost discipline
• Powerful operating cashflow: KSh 268.8M (vs only 12M last year)

 Key Point: The business is generating real cash — not accounting profits.

4. DIVIDEND POLICY & SHAREHOLDER RETURNS

KAPCH declared:

• Dividend: KSh 195.6M
• Dividend paid: KSh 192.3M

This shows:

• Strong confidence from management
• Ability to pay shareholders consistently
• A shareholder-friendly culture
• A long-term commitment to rewarding investors

Conclusion: Excellent for dividend-focused investors.

5. RISKS TO WATCH

These are mostly industry risks, not company-specific failures:

• Global tea price volatility
• Auction price drops
• Weather and climate effects
• Rising fertilizer & shipping costs
• Fair value gains can reverse if conditions worsen

Conclusion: Risks exist, but the company is financially strong enough to withstand difficult market cycles.

6. INVESTMENT VIEW — BUY / HOLD / SELL?

✔ Long-Term Investors → BUY

Strong assets, profitability recovery, solid cashflow, stable dividends.

✔ Dividend Investors → BUY

One of the most reliable dividend payers in the agricultural sector.

✔ Defensive Investors → BUY / HOLD

Financially safe and relatively low-volatility.

⚠ Traders / Speculators → HOLD

Short-term price action depends on auction prices and weather.

FINAL VERDICT

Kapchorua Tea (KAPCH) is a BUY / STRONG HOLD for long-term and dividend-focused investors.

It is financially healthy, profitable, stable, and consistently rewards shareholders.

Weaknesses are mostly industry-related, not a company problem.

If you want:

• Dividends
• Stability
• Strong balance sheet
• Real assets
• Consistent profitability
• Safer agricultural exposure

👉 KAPCH is a solid choice.

If you want hype, fast gains, or penny-stock volatility → this is not your stock.