HDFC Securities said: “Consolidated revenue grew by 58% to Rs 601 Cr, led by 52.8% growth in sugar segment sales and 157% growth in distilleries segment sales. Sugar segment sales growth was led by higher domestic sales quota and increased realization of sugar Sugar sold during Q3FY22 is 14.17 lakh quintals (including export of 2.50 lakh quintals) compared to the sale of sugar of 10.38 lakh quintals (all domestic) in the corresponding quarter last year. quintals) compared to 34.26 lakh quintals (including 8.05 lakh quintals of sugar exported during the corresponding period last year. The stock of sugar as of December 31, 2021 was 11.07 lakh quintals compared to the stock of 19.49 lakh quintals as of December 31, 2020.”
According to the brokerage, “Distillery volumes increased 2x to 1.13 liters of Cr with increased capacity utilization. Additionally, distillery realization increased 26% to 58 Rs.6/litre due to increased proportion of B-heavy ethanol. The company produces entirely B-Heavy ethanol given higher prices (B-heavy prices prevail at Rs 59/litre against Rs 46.6/litre for C-Heavy ethanol) Cogeneration sales remain stable at Rs 15.6 Cr. electricity was Rs 3.2/unit from Rs 3.1/unit EBITDA increased by 138% to Rs Cr 55 thanks to higher sugar volumes, realization of sugar and a higher proportion of B heavy ethanol. With liquidation of excess inventory & reduction of working capital debt, interest cost reduced from Rs 9.6 Cr to Rs 3 .9 Cr. PAT jumped 4x to Rs 29 Cr, helped by higher operating profit and lower interest charges.
The brokerage firm also pointed out that “the company would commission 170 KLPD distilleries by June 2022. Currently, the company is storing heavy B molasses in the Dwarikesh Nagar plant, which would be used for the production of ethanol heavy B after commissioning of new distillery On an annualized basis, DSIL would divert 25-30% of sugar cane to ethanol from FY24. , which includes a debt of Rs 30 Cr for the new distillery. There will still be a need for Rs 150 Cr debt for the new distillery over the next three months. However, the working capital requirement for the milling peak would decrease significantly.
Buy for a target price of Rs. 156
The brokerage claimed that “DSIL is one of the most efficient sugar companies with abundant cane availability, the best sugar recoveries in UP and aggressive distillery expansion. Riding the wave of the ethanol, the company is poised to increase its capacity by 10X from 30 KLPD in FY19 to 338 KLPD in FY24 We expect DSIL revenue to grow 10% CAGR during FY21-24E, with revenue higher from the Distillery division, driven by increased capacity and improved realizations, despite some moderation due to the likely reduction in sugar EBITDA margins are expected to increase by 516 basis points on the strength of domestic and international sugar prices , supported by increased ethanol volumes and improved blended distillery achievements with a favorable change in feedstock mix for ethanol production .
According to HDFC Securities “Furthermore, a higher diversion of sucrose to B-heavy molasses/juice-based ethanol would moderate inventory levels and reduce working capital debt and thus total debt levels ( despite increased debt for distillery investments) in the future Higher operating profit and lower interest expense is expected to drive a CAGR of 39%.The improved profitability associated with reduction in working capital requirements to generate robust cash generation (cumulative FCF of approximately Rs 613 in FY21-24E) to be used for debt reduction or further Therefore, DSIL could see an increase massive yield ratios.We believe that the base fair value of the stock is Rs 136 (10.5x FY24E EPS) and the bull case fair value is Rs 156 (12x FY24E EPS). Rs 120-126 in stock (9.5x FY24E EPS) and aj outer more on the Rs 108-112 band drops.”
The security was selected in the brokerage report of HDFC Securities. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author, and the brokerage are not responsible for any losses caused as a result of decisions based on the article.