This Small-Cap Sugar Stock Has Crashed Over 56% in a Month: Should You Buy?

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About the company

The company is an integrated sugarcane processing company. The Company is engaged in the manufacture and sale of sugar, energy and chemicals. The Company operates in three segments: Sugar, Distillery and Cogeneration

    Dhampur Sugar Swot Stock Price Trajectory and Analysis

Dhampur Sugar Swot Stock Price Trajectory and Analysis

The lowest and highest prices of the stock are Rs. 6.09 and Rs. 517.64, giving a return of 1099%.

The finances of the company remained strong and in FY21, the net profit of the company stood at Rs. 229 crores. Moreover, its debt/equity ratio has improved considerably.

Also within the scope of opportunities, the company has a good RoCE and is also weak on valuations with a TTM PE of 6.7, which is lower than its peers as well as the PE of the sector.

The concern, however, is with the increasing costs incurred year on year on long-term projects.

Threats: There are no threats to the sector as the sugar sector as a whole is placed in an ideal situation due to the government’s ethanol initiative.

So, since the fundamentals are strong and the sharp decline is largely due to the company split, one can still consider the stock based on its fundamentals.

The brokerage perspective on Dhampur Sugar

The brokerage perspective on Dhampur Sugar

Sharekhan in his report gave the buy on the sugar stock for a target of Rs. consistent earnings growth with higher EBITDA margins. The stock is currently trading at a valuation of 10.5x/8.4x EPS FY2023E/FY2024E, which is at a discount to some of its close peers. Strong earnings visibility, improvement
margin profile and balance sheet strengthening would help reduce the valuation gap with close peers in the coming years. Therefore, we are re-hedging the stock with a Buy recommendation, assigning a target price (PT) of Rs. 692 (valuing the stock at 11x EPS for FY2024E, a discount of 27% vs Balrampur Chini Mills target multiple.

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