Balrampur Chini trades near 2-year high in weak mkt; soars 58% in six weeks

Shares of Balrampur Chini Mills (BCML) were trading at nearly two-year high of Rs 174, up 3 per cent, on the BSE on Wednesday on expectations of improved operating performance. In comparison, the S&P BSE Sensex was down 1 per cent or 389 points at 11:00 am.

The stock of the sweetener company was trading at its highest level since November 2017. In the past six weeks, it has soared 58 per cent from a level of Rs 110.

Thus far in the month of September, BCML has outpaced the market by surging 30 per cent after rating agency ICRA reaffirmed the long-term rating for Rs 2,441 crore line of credit of the company with stable outlook. The benchmark index, in comparison, was up 4 per cent during the period under consideration.

ICRA said the “stable” outlook is underpinned by the highly integrated nature of operations, with presence in distillery and cogeneration, which supports the overall cashflows of the company. 

"Cashflows from the distillery and cogeneration business provides cushion against the cyclical cashflows of the sugar business. The rating agency expects BCML’s cashflows to remain comfortable relative to debt service obligations going forward," it added.

Brokerage firm Elara Capital, too, has initiated coverage of BCML with a 'Buy' rating, on expectations that the company would generate robust free cashflow of Rs 900 crore over FY19-21E on higher contribution from ethanol and improved sugar performance. This should, it believes, lead to further reduction in debt with a net debt-equity of 0.1 times in FY21E vs 0.8 times in FY19.

“The company is well positioned to capitalize on the government’s call to increase ethanol blending in petrol to 10 per cent by CY22 as it is increasing ethanol capacity by 45 per cent to 180 million liters per annum by December 2019, resulting in a distillery EBITCAGR of 25 per cent over FY19-21E. The minimum support price (MSP) intervention and lower production are likely to keep sugar prices above Rs 33/kg, resulting in a sugar EBITCAGR of 55 per cent over FY19-21E on low base,” the brokerage firm said in a sugar sector update.