Sugar stocks rally for second straight day; Balrampur Chini hits 13-yr high

Balrampur Chini Mills surged 5% to Rs 183, to quote at its highest level since May 2006. In the past month, it has outperformed the market by zooming 24%, as compared to a 1% rise in the Sensex

Shares of sugar manufacturers extended their rally for the second day in a row, with sector giant Balrampur Chini Mills hitting 13-year high on Friday on the BSE. Lower cane crushing and subsequent decline in sugar production has led to sugar stocks ralling in the past few sessions.

Balrampur Chini Mills surged 5 per cent to Rs 183 in the intra-day trade, to quote at its highest level since May 2006. The stock had hit an all-time high of Rs 205 on April 2006. In the past one month, it has outperformed the market by zooming 24 per cent, as compared to a per cent rise in the S&P BSE Sensex.

Dwarikesh Sugar Industries, meanwhile, rallied 8 per cent to Rs 31.90 today, soaring 17 per cent in the past two trading days. The stock was trading close to its 52-week high level of Rs 32.95, touched on March 7, 2019.

That apart, Dalmia Bharat Sugar and Industries, Dhampur Sugar Mills, Ravalgaon Sugar Farm, Avadh Sugar & Energy and Mawana Sugars were up in the range of 2 per cent to 5 per cent on the BSE.

“India sugar production is down 35 per cent year on year (YoY) at 4.58 mn tonne as on 15 December. This drop in production is primarily due to a sharp decline in sugar production in Maharashtra and Karnataka,”  industry body Indian Sugar Mills Association (ISMA) said in its latest press release. 

Reduction in sugar inventories, say analysts at ICICI Securities, in the next six months, could result in robust cash flow from operations for Balrampur Chini Mills. They have ‘buy’ rating on with price target of Rs 210 per share.

“The sugar industry is going through a transformation with the introduction of MSPs & increasing level of ethanol blending programme. With increasing ethanol volumes, prices and higher export this year, we believe the company would be able to aggressively liquidate its inventory. This, in turn, would result in additional free cash flows and further de-leverage its balance sheet,” the brokerage firm said in company update.