The stock of Dwarikesh Sugar Industries Limited (DSL) provided a return of 230% to its shareholders in one year. The action stood at Rs 24 on July 20, 2020. It rose to Rs 79.20 today, translating into gains of 230% during the period. In comparison, Sensex has grown 42% in one year.
Rs 5 lakh invested in the share of the sugar bowl a year ago would have turned into Rs 16.5 lakh today.
Share rose 4.83% to an intraday high of Rs79.20 on BSE. It finished up 3.31% to Rs 78.05 from the previous close of Rs 75.55. The company’s market capitalization reached Rs.1469.69 crore. The share is above the 5-day, 10-day, 20-day, 50-day, 100-day, and 200-day moving averages.
According to MarketsMojo, the major player in the Indian sugar industry has a strong debt service capacity as the company has a low debt to EBITDA ratio of 1.50. The technical trend has improved from slightly bullish on June 4, 2021, and the stock is now technically in a bullish range and has generated a 37% return since then. Several factors for the stock are bullish like MACD, KST, DOW and OBV.
He also noted that the company has a high Return on Capital Employed (ROCE) of 28.31 percent and the stock looks fairly valued at the moment. The EPS rose to Rs 2.56 in March 2021 against Rs 2.35 in March 2020.
ICICI Direct has a “Buy” rating on the stock with a revised target price of Rs 110 (previously Rs 62). The brokerage house noted that with high profit growth and reduced inventory, DSL would be able to generate operating cash flow of Rs 150-300 crore each year.
“With the possibility of increased exports, DSL would be able to significantly reduce its sugar stocks over the next year. In addition, increasing distillery volumes via the B-heavy route and sugarcane juice would lead to growth in operating profit, ”he added.
Recently, the company announced that it has embarked on a project to install a 175 kiloliters per day (KLPD) distillery at its Dwarikesh Dham unit, Dist. Bareilly, Uttar Pradesh. DSL has advised that the Letter of Intent (LOI) required for the critical equipment is being issued. The company plans to complete the project within 15 to 16 months.
“The proposed distillery will use sugarcane juice / syrup as the main raw material during the cane crushing season and will look to the B Heavy (or grain) molasses route during the off-season for continued manufacture of cane. ethanol, ”DSL added.
Sugar stocks have been on a roll in recent months. In June 2021, Prime Minister Narendra Modi said the target date for achieving 20% ethanol blending with gasoline was brought forward by five years until 2025 to reduce pollution and reduce dependence on gasoline. with regard to imports.
Ethanol extracted from sugar cane as well as damaged food grains such as wheat and broken rice and farm waste are less polluting and its use also provides farmers with another source of income.
Speaking at the launch of the ethanol roadmap on World Environment Day, Modi said the target of blending 20% ethanol into gasoline had been pushed forward by 2030 to 2025.
Currently around 8.5% ethanol is blended with gasoline compared to 1-1.5% in 2014, he said, adding that the ethanol supply has increased from 38 crore liters to 320 crore. liters.
“With the acceleration of ethanol blending by petroleum marketing companies (OMCs) and the government’s position on increasing blending targets to 20%, supported by remunerative ethanol pricing and fuel programs. ‘incentive to build capacity in order to achieve the same goal, the economy of the sugar industry is improving, “CARE Ratings said in a report.
He estimates that with the rationalization of sugar stocks, the balance between supply and demand and a considerable increase in ethanol sales, the cash flow of integrated sugar factories will improve in the next three to four years. .