This stock of UP-based sugar soared 41% in 8 days; is trading at an all-time high


Shares of Dwarikesh Sugar hit a new high of Rs 113.70, after gaining 9% on BSE in intraday trading on Wednesday on expectation of strong earnings. The sweetener company’s stock has soared 41% in the past eight trading days.

Over the past week, the stock has outperformed the market by jumping 25%, against a 3% decline on the S&P BSE Sensex. At 09:48; the stock rose 5% to Rs 109.75, against a gain of 0.40% on the benchmark.

Dwarikesh Sugar is a sugar company based in Uttar Pradesh with a sugar crushing capacity of 21,500 TCD, a distillery capacity of 163 KLD and a cogeneration capacity of 91 MW.

In the October to December quarter (Q3FY22), the company reported an almost four-fold increase in profit after tax (PAT) to Rs 28.88 crore from Rs 7.47 crore in Q3FY21. Total revenue rose 56% year-on-year to Rs 602 crore from Rs 385 crore in the prior year quarter. The sugar segment’s sales growth was driven by the increase in domestic sales quota and the increase in sugar realization.

Dwarikesh Sugar said estimated sugar production in the upcoming 2021-22 season exceeded 31 million tonnes after taking into account 3.4 million tonnes of sugar sacrificed in favor of ethanol. The execution of our 175 KLPD distillery project at the DD unit is proceeding on schedule despite inclement weather and off-season rains. The plant is expected to be commissioned in June 2022, the company said.

Dwarikesh Sugar is one of the most efficient sugar companies with abundant availability of cane sugar, best sugar recoveries in UP and aggressive distillery expansion.

The ICICI Securities analyst estimates that sugar prices would increase to 36-37 rupees/kg by April 2022. The increase in distillery volume and higher sugar prices would lead to significant increase in profit margins. operations and profits of sugar companies. With an aggressive expansion of the distillery, Dwarikesh Sugar would be one of the biggest beneficiaries of the sugar industry. With most sugar companies still trading at single-digit multiples on FY24 earnings, there is ample room for multiple expansion, the brokerage said.

“With increasing profitability and reduced sugar stocks, Dwarikesh Sugar would be able to generate cumulative free cash flow of Rs 517 crore over the next three years. It would completely deleverage the balance sheet,” ICICI Securities said, with a “buy” rating on the stock and a target price of 135 rupees per share.

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