Dhampur Sugar Mills T2FY22 Results
According to ICICI Direct, “Consolidated revenues were down 18.1% to Rs 762.5 crore due to a 27.4% drop in sugar sales due to a 33.6% drop in sugar volumes. The company sold 1.44 lakh tonnes (lt) of sugar during the quarter. However, sugar prices started to increase from August 2021, resulting in an increase of 3.9 % of the realization of the sugar to 34.6 Rs / kg. The current prices in force are 36 Rs / kg. “
The brokerage said the sales of the company’s’ distillery (ethanol, chemicals, country liquor) grew 41.7% due to a higher 5.5% increase in sales volumes. ethanol, a 10% increase in the achievement of ethanol with a higher proportion of B-heavy ethanol. the total of 3.09 crore liter of ethanol, heavy ethanol B was 2.93 crore liter (95%) and 0.16 crore liter heavy ethanol C. The chemical activity volumes also increased by 7% to 66.6 lakh kg with a 70.8% increase in average achievement. “
“The company owns 1.88 lakh ton of sugar valued at 29.47 / kg. With sugar prices in effect at Rs 36 / kg, DSL would be able to achieve a margin of Rs 6.5 / kg in the third quarter. of fiscal year 22. We believe that the company would be able to exhaust 2020 – 21 sugar stocks by January 2022 “, specifies the broker.
“Operating profit was down 8.4% to Rs 66 crore impacted by lower sugar sales volumes. However, operating margins improved 100 basis points to 8.7% thanks to improved sugar prices, higher distillery volumes and an increase in the completion of the distillery. Interest charges were down 15.6% to Rs 17.8 crore with a reduction of debt and lower interest rates. PAT fell 4% to Rs 26.7 crore and EBITDA was at Rs 66 crore, down 8.4% yoy, with margins of 8.7 %, “says ICICI Direct.
Main triggers for the future price performance of Dhampur Sugar Mills according to ICICI Direct
- DSL is increasing its ethanol capacity by 2x to 22 crore liter by FY24, which would result in a distillery sales CAGR of 24% to Rs 1,535.4 crore in FY21-24E. The company derives 35% of its turnover from the distillery activity.
- The company would increase its crushing of sugar cane by 5 to 10% over the next year. This would help him to use the extra sugarcane for the production of ethanol from sugarcane juice.
- We forecast a cumulative free cash flow of Rs 656 crore over the next three years which would reduce debt levels and boost earnings growth.
Buy Dhampur Sugar Mills with a target price of Rs 430 / share
ICICI Direct reported that “The sugar industry is moving from a cyclical industry to one of structural growth by increasing distillery capacities over the next three years. The industry was able to reduce sugar stocks from 14.5 million tonnes in September 2019 to 8.2 million tonnes in September 2021 thanks to aggressive exports and a diversion of sugar cane to ethanol production . This has caused domestic sugar prices to rise from Rs 32 to 33 / kg to Rs 37 / kg over the past four months. “
“The DSL share price has increased 2.7 times over the past five years (from Rs 113 in November 2016 to Rs 308 in November 2021). We are forecasting a 2-fold increase in distillery volumes to increase earnings with an 18% CAGR over FY21-24E. We believe that the firmness of sugar prices and increased ethanol capacity would lead to strong earnings growth over the next three years. Dhampur Sugar would be split into two separate entities with equal assets. The resulting company “Dhampur Bio Organics” would be listed on the stock exchange with mirror shareholders. We maintain our PURCHASE recommendation on the stock with a target price of Rs 430 / share (previously Rs 500 ), “said ICICI Direct in its research report.
This action is taken from the ICICI Direct brokerage report. 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.