Sugar stocks on a roll; Dwarikesh, Dhampur, Uttam, Dalmia soar over 15%

India's sugar industry is well poised to benefit from global and domestic factors.

Shares of sugar companies were on a roll at the bourses, on Monday, with Bajaj Hindustan, Dwarikesh Sugar Industries, Dhampur Sugar Mills, Avadh Sugar & Energy, Uttam Sugar Mills and Dalmia Bharat Sugar and Industries rallying between 15 per cent and 20 per cent, in an otherwise weak market, on healthy outlook.

Triveni Engineering & Industries, EID Parry, Shree Renuka Sugars and Balrampur Chini Mills gained in the range of 10 per cent to 12 per cent. In comparison, the S&P BSE Sensex was down 0.61 per cent at 48,484 points, at 02:03 pm.

Most of the brokerages have positive stance on India’s sugar industry as it is well poised to benefit from global and domestic factors. Lower output from countries like Brazil, Thailand and the EU would keep supplies tight and global prices firm, enabling India to increase exports. On the domestic front, favorable policies, rising ethanol demand (blending target of 20 per cent by CY25 from 8 per cent currently), aggressive ethanol capacity addition would drive an earnings by going forward.

Domestic sugar prices have increased 7-8 per cent in last one month mainly due to high summer demand & crushing season getting over reflecting no surprises on sugar production front. Analysts at ICICI Securities believe domestic sugar prices would remain above Rs 34/kg given aggressive exports & diversion of sugarcane towards ethanol production.

Global sugar prices are also on rise (around 15 per cent in last two months). The current raw & white sugar prices are above cost of production for Indian millers. We believe global raw sugar prices can easily cross 20 cents/lb in the next six months given Brazil is expected to witness 20 per cent production decline in 2021-22 season. This would ensure sustainable export dynamics in the next season as well. We believe India’s sugar inventory levels would come down to around 7 million tonnes (MT) by September 2022, the brokerage firm said.

The harvest season has commenced in Brazil and initial trends point to a lower crop yield this year, owing to less sowing and unfavorable Monsoon conditions. Sugarcane yield is likely to drop this season and its quality also is likely to go down, which could impact recovery rates in Brazil.

As a result, we expect Brazil’s millers to restrict sugar production this year. With some other key sugar-producing countries, such as Thailand, & EU, not expected to produce higher output, we believe the global demand-supply scenario to remain tight. Global commodity traders expect at least a 10 per cent drop in sugar output in Brazil to 34-35mn tonnes. Hence, international sugar prices have started to firm up and crossed 16.5 US cents per pound. This augurs well for India’s sugar industry, which has surplus inventory of 10.5mn tonne, analyst at Elara Capital said in sugar sector update.

COMPANY	LATEST	PREV CLOSE	GAIN(%)
Dhampur.Spl.Sug.	29.40	24.50	20.0
Ponni Sug.Erode	212.20	176.85	20.0
KCP Sugar &Inds.	21.25	17.71	20.0
Kesar Enterprise	71.15	59.30	20.0
Uttam Sug.Mills	159.70	133.10	20.0
Bajaj Hindusthan	8.72	7.27	19.9
Sakthi Sugars	13.06	10.89	19.9
Ugar Sugar Works	28.60	23.85	19.9
Sir Shadi Lal	52.40	43.70	19.9
Dwarikesh Sugar	50.30	41.95	19.9
KM Sugar Mills	19.85	16.56	19.9
Indian Sucrose	29.65	24.75	19.8
Dhampur Sugar	269.15	227.10	18.5
Avadh Sugar	334.00	282.65	18.2
Dalmia Bharat	299.40	253.45	18.1
Triven.Engg.Ind.	143.55	122.45	17.2
Bannari Amm.Sug.	2011.00	1752.50	14.8
Vishwaraj Sugar	128.45	115.10	11.6
EID Parry	385.90	345.95	11.6
Balrampur Chini	306.45	278.35	10.1