- 03 Feb 2022
- ICICIdirect Research
Distillery volumes, higher sugar prices boost Avadh earningsAVADHSUGAR - 482 Change: -0.25 (-0.05 %)
News: Avadh Sugar reported robust Q3FY22 results with sales growth of 7.2% led by strong 8.1% growth in sugar segment & 9.8% growth in distillery segment. Co-generation sales dipped by 10.8% due to late start of the crushing season. The growth in sugar segment was aided by higher exports & strong sugar prices during the quarter. Distillery segment sales growth was led by higher proportion of B-heavy ethanol. Operating profit witnessed a growth of 70.2% to Rs.73.1 crore led by sharp increase in sugar prices (moved up from Rs.33/kg in July 2021 to Rs.37/kg October 2021) & higher proportion of B-heavy ethanol. The company is aggressively diverting sugarcane to produce ethanol through B-heavy molasses & sugarcane juice. Interest cost come down from Rs.26.4 crore to Rs.16.2 crore mainly on account of liquidation of inventories & reduction in working capital debt. Net Profit grew from Rs.3.7 crore in Q3FY21 to Rs.28.9 crore led by higher operating profit & reduction in interest costs.
Views: Avadh Sugar has been a major beneficiary of increase in global as well as domestic sugar prices. The company was a laggard in sugar exports in previous seasons. However, it has been able to utilises the opportunity of higher global raw sugar prices to aggressive export surplus sugar inventory during the current sugar season. Moreover, it is increasing its distillery capacity from 240 KLD to 320 KLD by April-May 2022. With this expansion, the company would be able to produce 11 crore litres of ethanol in FY23. Aggressive exports & sugarcane diversion towards ethanol would lead to significant reduction in inventories & in turn de-leveraging of balance sheet. We believe interest cost reduction would result in splendid profit growth in next two years. We remain positive on sugar sector in general & Avadh Sugar in particular