According to the brokerage “BCML reported YOY revenue growth of 13.1% to Rs 1,212 Cr in Q3FY22 due to higher realization of sugar (YOY growth of 11.9% to Rs 36, 3/kg) and a significant increase in heavy ethanol B volumes from 130.7% YoY to 2.3 liters of Cr in the quarter. the current season due to weather conditions and red rot in the company’s catchment areas has reduced sugar production and impacted sales volumes Distillery revenue has grown at a rate annual growth of 27.7% to Rs 172 Cr, while distillery volumes (heavy ethanol B and C-) recorded an annual growth of 4.0% to 2.6 liters Cr. was lower than sales volume due to the higher proportion of B-heavy ethanol volume in the segment. ed at 90.0% in Q3FY22, compared to 40.6% in Q3FY21. »
HDFC Securities noted that “the company recorded an annual growth of 47.6% to Rs 268 Cr in gross margin, while gross margins improved at an annual rate of 518 basis points to 22.1% in due to a favorable product mix.Similarly, EBITDA grew YoY by 174.2% to Rs 100 Cr, while EBITDA margins improved by 484 bps YoY to 8 .2% during the quarter, while other income increased at an annual rate of 138.4% to Rs 26.5 Cr due to the dividend (Rs. 14.92 Cr) received from the associated company. , net profit recorded an annual growth of 138.5% to Rs 64 Cr, while net margins improved by 278 basis points year-on-year to 5.3% in the quarter.
The brokerage also said: “The company has completed the expansion of its Gularia Distillery from 160 KLPD to 200 KLPD. The greenfield/brownfield expansion programs for Maizapur and Balrampur distillery are on track, and are expected to begin production at the increased capacity from November 2022.”
Buy for a target price of Rs. 579
HDFC Securities pointed out that “The sugar industry is known for its cyclical nature. However, it has seen structural changes with: (1) rational changes in government policies, and (2) flexibility offered, such as the diversion of surplus cane and B- heavy molasses are now allowed to produce ethanol that can be blended with gasoline c) tiered ethanol pricing (based on feedstock) These structural changes in the fundamentals of the sugar industry in India, offering the fungibility of sugar to ethanol and vice-versa has helped the sector to improve its profitability and stabilize the cyclicality.This would automatically help to optimize sugar production and stocks, thereby improving profitability and the liquidity situation of the sugar mills.
“BCML has capitalized on unprecedented political tailwinds with an increase in distillery capacity, likely to reach 1050 KLPD by December 2022, making it the largest ethanol producer in Uttar Pradesh. This provides strong revenue visibility while higher margins could help drive profitability growth. of ethanol will further improve the working capital cycle, resulting in superior cash generation. We expect BCML revenue and PAT to grow at a CAGR of 10% and 19% in fiscal year 21-24E. EBITDA margins will improve by 316 basis points in fiscal year 21-24E,” the brokerage said.
The brokerage also claims that “We like BCML because of its strong balance sheet, high level of integration (the business needs to maximize the value of every cane crushed) and strong cash flow generation. The company has also created great value for shareholders through consistent dividends and buybacks.We believe the base fair value of the share is Rs 542 (14.5x FY24E EPS) and the fair value of the case bullish is Rs 579 (15.5x FY24E EPS). Investors can buy the Rs. 481-488 band in stock (14x FY24E EPS) and add more on dips in the Rs 432-488 band.”
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.