Balrampur Chini stock nears record high, gains 5% on stable Q1 performance

Shares of Balrampur Chini Mills hit an over two-year high at Rs 519.70, surging 5 per cent on the BSE in Tuesday’s intra-day deals after the company delivered a stable performance for the June 2024 quarter (Q1FY25). 

The company reported improvement in volumes and realizations in the sugar segment that supported its overall performance. With adequate sugar stocks in India, analysts expect resumption of ethanol-blending program as was the case until Sugar Season (SS) 23.

The stock of the sweetener was trading at its highest level since April 2022. Balrampur Chini is seen inching towards its record high of Rs 525.70 touched on April 8, 2022. At 11:57 am; the stock was quoting 4.4 per cent higher at Rs 517.40, as compared to 0.1 per cent decline in the BSE Sensex.

In Q1FY25, Balrampur Chini reported 1.8 per cent year-on-year (YoY) increase in earnings before interest, tax, depreciation and amortization (EBITDA) at Rs 166.13 crore as against Rs 163.18 crore in Q1FY24. Revenue from operations grew 2.3 per cent YoY at Rs 1,421.60 crore.

Despite facing challenges in distillery operations due to regulatory issues, sugar segment has continued to perform well in a seasonally soft quarter, benefiting from higher volumes and realizations.

For the ensuing season, IMD is forecasting a normal monsoon which will aid to better yields. Lower diversion of cane towards Gur- Khandsari and better yield should translate to higher cane availability in Uttar Pradesh. In contrast, lower cane is expected in Maharashtra and Karnataka due to lower acreage, the company said.

Meanwhile, the management expected sugar inventory at ~8.55 MMT as on 30th September 2024 in the country alongwith expected production of 32 MMT (pre-diversion) for the SS 24-25 and domestic consumption of around 29 MT provides enough headroom to the Government to carry on the blending programme under Juice & Bheavy route unhindered and possibly leave room for exports too. In the past, we have seen that closing stock of 5.5 MMT has been considered sufficient, the management said.

Analysts at Elara Capital in sugar sector report said that the changes in the Ethanol Procurement Policy this year are likely to be a one-off (as a precautionary measure against the risk of low sugar production) and valid between November 2023 and October 2024. Hence, these changes may impact only H2FY24-H1FY25 financials.  

The brokerage firm expects normalization from H2FY25. They have a neutral view on the sugar sector in the short term, given earnings strain in H1FY25, but retain its positive stance in the medium to long term, due to the ethanol blending program. Balrampur Chini is analysts’ top pick in the sector.