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  • 03 Feb 2022
  • ICICIdirect Research

FIRM SUGAR PRICES LEAD TO EARNING GROWTH FOR BALRAMPUR

BALRAMCHIN - 506 Change: 10.00 (2.02 %)

News: Balrampur Chini reported healthy Q3FY22 results with 13.1% revenue growth & 3x jump in operating profit. The growth was led by 11.5% growth in sugar segment (co-generation segment merged with sugar segment) & strong growth of 27.7% in distillery segment. The strong growth in distillery segment sales was led by higher proportion of B-heavy ethanol.  Though, sugarcane availability in the company’s catchment area was adversely impacted by flooding in October 2021, it has been able to source sugarcane from surrounding mills. We believe sugarcane crushing for the company would increase in current season compared to last season. Operating profit growth was led by higher sugar prices & increase in proportion of B-heavy ethanol. Interest cost have come down from Rs.5 crore to Rs.3.7 crore during the quarter. Net profit grew by 138% to Rs.64.1 crore during the quarter. It is important to note that corresponding quarter earnings were adversely impacted by lower crushing due to red rot disease.

Views: With the expected sugar exports to the tune of 6.0-6.5 million tonnes for 2021-22 sugar season & aggressive sugarcane diversion towards ethanol, sugar inventories are expected to rationalisation in the country from 8.2 million tonnes to 6.5-7.0 million tonnes by September 2022. We believe this would result in perk up in domestic sugar prices to |37/kg in in next three months. Though, Balrampur Chini has been facing an issue of sugarcane availability from last two years, we believe the company has been able to source additional sugarcane from surrounding sugar mills. The company would be commissioning its 320 KLD distillery by November 2022, which would take its distillery capacity to 35 crore litres from current 18 crore litres. We continue to maintain that Balrampur Chini is the most efficient sugar company with strong track record for shareholders pay-out. We maintain our positive stance on the company.

Impact: Positive