Dalmia Bharat sugar (DBS) is only sugar company present in UP as well as in Maharashtra. The company has sugar crushing capacity of 39000 TCD (5.5 lakh tonnes pa), distillery capacity of 600 KLD (18 crore litters pa) & co-generation capacity of 102 MW & Wind power of 16.5 MW (Total 30 crore units’ saleable power)
DBS posted revenue growth of 14.6% led by high ethanol sales
DBS’s share price has gone up 114% in last five years (from Rs 175 in August 2017 to 375 in July 2022)
We value the stock at Rs 490, ascribing a multiple of 10x FY24 earnings
We also like Balrampur Chini in our Sugar coverage universe
|Key Financials||FY20||FY21||FY22||5 Year CAGR % (FY17-22E)||FY23E||FY24E||(Blank)||CAGR % (FY22-24E)|
|Total Operating Income||2,110.8||2,685.8||3,018.3||12.4||3,143.8||3,411.1||-||6.3|
|EBITDA Margin %||15.9||17.6||14.8||-||18.0||19.0||-||-|
Q1FY23 Results: High sugarcane prices, lower recovery and consumer business losses drags earnings
Dalmia Bharat Sugar is one of the most efficient sugar companies with high distillery capacity compared to crushing operations. This gives a leeway to divert more sugarcane towards ethanol given sugar prices are unlikely to witness runaway surge in future. The company is also setting up 100 KLD grain based distillery to utilise high availability of broken rice / other grains in its catchment area in UP. With mere Rs 403 crore debt & Zero net working capital debt, DBS has one of the strongest balance sheet in sugar industry. We believe the company would be able to generate ~40% of its revenue from distillery segment in FY24 after the completion of its capex. Further, the company has the capacity to exports 2.25 lakh tonnes of high grade refined sugar, which is likely to improves its sugar realisation going forward. Foray & early exit in some of the categories in consumer business is disappointing. However, we remain positive on sugar industry as well as DBS. We maintain our Buy recommendation & revise our target price to Rs 490 / share
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