CMP Rs 64 ( FV 1) Analyst : Janak Shah (M.B.A. Finance)
Market Cap Rs 1567 crs Date: 16th October 2015
Target : Rs 80 Time frame : 1 year target
About the Company:
The company is one of the oldest sugar mills and has had a good capacities in sugar, power and distilliery. The management is one of the most well respected in the sugar sector and is headed by Mr Vivek Saraogi. The sugar sector has seen bad times in the last few years and it on the verge of a upturn.
Sugar is a very cyclical commodity. One has to keep an eye on the debt levels of the company and ROE’s
Balrampur Chini Mills Ltd has a capacity of 76000 TCD for sugar 320 KLPD for distillery and 180 MW of power capacity. The other products are ethanol which is a by products from the sugar manufacturing process. Most of the plants are in UP state.
The debt equity ratio for Balrampur Chini is 1: 2 and it might improve this year also the book value is Rs 43 per share and it is a Re 1 face value paid up stock. The company has seen the last couple of year as tough. Now the increasing sugar prices has showed some hope that the results will be better in the future. The co gen business which had bagasse as raw material were making profits and the sugar division was making losses. The distillery was also making profits. Now the sugar business has started turning around and the results will be visible soon. For the year ended March 2012, sales was at 2309 crs and the net profit was 6.62 crs. For the year 2013, the sales were at Rs 3274 crores and Net profit was at Rs 162 crores. In 2014, the sales fell to 2664 crores and net profit was just 3.64 crores. For the year 2015, the sales stood at Rs 2986 crs and net loss for the year was at Rs 57.76 crores.
Though the first quarter for 2015-16 was bad, the year looks positive for the company.
Promoters hold about 41% while fii’s and dii’s hold 30% the public holding is about 27%.
Comparisions to Peers:
The company can be compared to sugar companies like bajaj Hindustan, shree renuka sugar, dhampur sugar and bannari aman sugar.
The sugar cycle has seen the worst of its years getting over. Now as the price of sugar is hardening, the cycle is turning. It will not be long before the sugar companies will start making profits again. No new sugar plants have come up and the sugar prices ex factory can see a 10% rise from the current levels. Balrampur has all of its cards in place and will reap rich benefits. World over the sugar prices made a low of 10.44 cents from which it is up 35% from the lows in just a month. This shows a lot of strength and a significant upmove from lows.
The share which is quoting at Rs 64 has the potential to cross the 70 mark in the medium term and can also cross the 80/- mark in 1 year. It is a fundamentally very sound company which might ride high on the increasing sugar prices globally.
( Disclosure: The analyst has no holdings in the company as on date of issue being published)