Balrampur Chini zooms 8% in a weak market; stocks rallies 18% in 4 days

Shares of Balrampur Chini Mills, in Thursday's intra-day deals, soared 8 per cent to Rs 208.80 on the BSE, in an otherwise subdued market. The stock has now rallied 18 per cent in the past four trading days. The stock surpassed its previous high of Rs 205, touched on April 21, 2006.

In the past one month, Balrampur Chini Mills has outperformed the market by surging 27 per cent, as compared to 0.88 per cent rise in the S&P BSE Sensex, on account of sharp rise in surge prices in international market.  However, in six months, it performed in line with the benchmark index, which gained 33 per cent during the period.

Global commodity prices are now in a bull phase with an imminent recovery in the world economy as prospects have become better with the vaccination drive pricking up. Since December, sugar price rallied 15 per cent in international market. The rally in sugar prices which are going up which can be something India can leverage in terms of exporting surplus sugar as there is expectation of stocks to build up this year, CARE Ratings said in a recent report.

Besides, for the October-December quarter (Q3FY21), Balrampur Chini reported a disappointing set of numbers with 10.3 per cent decline in sales & 67 per cent dip in earnings. The de-growth in sales & earnings was mainly due to increase in cost of production as like to like recoveries are lower in current season adversely impacted by weather conditions. Further sugarcane yield was also impacted by red rot disease in some parts of UP.

Sugar realisation remained flat with delay in announcement of export subsidy & higher domestic sales quota. However, analyst at ICICI Securities believe the impact of these factors is temporary for this season and long term story of sugarcane diversion towards ethanol to balance sugar inventories remained unchanged.

Sugar industry is going through a transformation given industry is creating distillery capacities to divert sugarcane for ethanol. The current season would see 2.0 MT of sugar sacrifice for ethanol. Further, with capacities coming on stream in the next few years, the industry would see 4-5 MT of sugar sacrifice for ethanol. This would improve distillery profitability & would help maintaining sugar inventories at rational level, the brokerage firm said.

“The company would continue to generate strong cashflows. We expect operating cash flow to the tune of Rs 760 crore & Rs 920 crore for FY21E & FY22E, respectively,” analyst said in Q3 result update.