Sugar stocks rally on strong outlook; Triveni, Balrampur hit new highs

According to CRISIL, sugar mills are expected to see both revenue and profitability improve in the 2022 season (SS 2022; October 2021 to September 2022).

Shares of sugar companies were in demand in Tuesday’s intra-day trade and had rallied up to 10 per cent amid heavy volumes on strong outlook. Triveni Engineering & Industries, soared 9 per cent to Rs 244, and crossed its earlier high of Rs 235 hit on December 28, 2021 on the BSE. Similarly, Balrampur Chini Mills surged 7 per cent to Rs 399, and surpassed its previous high of Rs 398.25 touched on October 18, 2021.

Dhampur Sugar Mills, Dalmia Bharat Sugar and Industries, Avadh Sugar, Dwarikesh Sugar, EID Parry (India), Mawana Sugars and Uttam Sugar Mills were up in the range of 5 per cent to 10 per cent on the BSE. In comparison, the S&P BSE Sensex was up 0.53 per cent at 59,498 at 10:42 am.

According to a CRISIL report, sugar mills are expected to see both revenue and profitability improve in the 2022 season (SS 2022; October 2021 to September 2022).

Sugar prices are expected to rise 16-17 per cent this season, compared to a marginal fall in the last year, led by a pickup in industrial demand and increased exports. An increase in consumption amid stable production is expected to deplete inventories, leading to the sharp rise.

Higher sales volumes and higher realisations will aid revenue growth of 18-19 per cent. Cane costs, meanwhile, are expected to rise at a slower pace of 8 per cent in north India and 3 per cent in south India. This would provide ample room for improvement in operating profitability, or earnings before interest, taxes, depreciation and amortisation (Ebitda) margin, which is expected to increase by 300-400 basis points, CRISIL said. CLICK HERE FOR FULL REPORT

In November, CRISIL Ratings had upgraded its rating on the long-term bank facilities of Balrampur Chini Mills Ltd (BCML) to ‘CRISIL AA+/Stable’ from 'CRISIL AA/Positive’. The rating action factors in the enhanced business risk profile, driven by growing diversity and better profitability from the distillery division, with ethanol produced being supplied at remunerative prices for blending with gasoline. Lower fluctuations in ethanol pricing, which is linked to price of sugarcane, has helped mitigate the volatility in business performance associated with sugar business, rating agency said in rationale.

Meanwhile, ICRA expects Triveni Engineering’s (TEIL) revenues in FY2022 to remain stagnant, notwithstanding higher revenues from the distillery division, offset by lower sugar volumes (both domestic and exports). Further, higher sucrose diversion towards B-heavy molasses/juice-based ethanol would moderate the inventory levels and hence lower its working capital borrowing levels especially in FY2024.

Additionally, TEIL has forayed into production of country liquor in FY2021, thus, further facilitating forward integration. Moreover, TEIL’s grain-based distillery of 60 kilo litres per day (KLPD) is expected to commence its operations in Q4 FY2022, which is likely to strengthen its operational profile and improve revenue diversification, ICRA had said in November rating action.

COMPANY	LATEST	PREV CLOSE	GAIN(%)
Kesar Enterprise	92.60	84.20	9.98
Magadh Sugar	274.00	250.20	9.51
Dharani Sugars	19.85	18.15	9.37
Triven.Engg.Ind.	239.70	224.50	6.77
KM Sugar Mills	29.20	27.35	6.76
Dhampur Sugar	328.00	307.25	6.75
Balrampur Chini	398.55	374.15	6.52
Dalmia Bharat	410.50	387.05	6.06
Avadh Sugar	501.00	472.90	5.94
Uttam Sug.Mills	193.00	182.40	5.81
Rana Sugars	26.70	25.30	5.53
Sakthi Sugars	16.35	15.50	5.48
Dwarikesh Sugar	76.60	72.90	5.08
Dhampur.Spl.Sug.	39.90	38.00	5.00
Parvati Sweetner	21.10	20.10	4.98
Bajaj Hindusthan	15.85	15.10	4.97
EID Parry	477.40	455.35	4.84
Mawana Sugars	83.50	79.95	4.44
Sh.Renuka Sugar	31.75	30.40	4.44
Ugar Sugar Works	31.45	30.25	3.97