LARGE CAP
SHREE RENUKA SUGARS CMP: Rs 52
In the midst of a weak pricing scenario over the past two years, Renuka Sugars continues to expand through acquisitions and greenfield projects. It will invest Rs 3.5 bn in a 2,000-tpd refinery in Mundra SEZ to be commissioned by 2010. This will take its refining capacity to 6,000 tpd. With sugar prices set to improve by end of 2008-09 crushing season, ongoing capex would boost sugar volumes.
Triveni Engineering CMP: Rs 38
Triveni Engineering (TEIL) is among the largest sugar producers in India with a presence in sugar and engineering segments. This makes the stock a strong play in the sugar cycle at relatively lower risk, given its additional presence in engg business. We expect the company to clock 21.9% revenue and 58.1% net profit CAGR over FY08-10E. Sugar prices will rise, given the domestic and global deficit situation.
MID CAP
BALRAMUR CHINI CMP: Rs 32
It reported its Q4SY08 (sugar year) results with a topline growth of 40% to Rs 416.7 crore from Rs 297.8 crore in Q4SY07, supported by volume growth and improvement in price realisations. It currently holds a large sugar inventory, in anticipation of higher sugar prices and it is well positioned to gain in such a scenario. However, disputes over pricing between the industry and the state pose concerns.
Bajaj Hindustan CMP: Rs 41
Revenues are expected to rise by 47.4% QoQ to Rs 676.7 crore on account of higher sugar prices and strong growth in volumes. EBITDA margins are expected to improve to 31.4% QoQ on the back of higher sugar and rectified spirit prices. Net profit is expected to stand at Rs 58.5 crore from the loss of Rs 35.5 crore in Q3SY08. Key swing factors are firm sugar prices and the SC ruling on sugarcane prices.
SMALL CAP
DWARIKESH SUGAR IND CMP: Rs 28
It is a mid-sized sugar mfg company with operations across three units in UP. Its capacities for sugarcane crushing stand at 21,500 TCD, distillery at 30 KLPD and cogeneration at 56 MW. Its profitability will come primarily from its 56 MW (saleable) cogen power plants. This, coupled with firm sugar prices, is likely to boost cash flows.
INDIA GLYCOLS CMP: Rs 52
It is one of the leading manufacturers of glycols and ethylene oxide derivatives, which cater primarily to industries like textiles, agrochem, oil and gas, detergents and paints. In December 2007, it acquired Shakumbari Sugar and Allied Industries for Rs 47 crore, which gave it flexibility in making ethanol through molasses or sugarcane depending on their price cycles.
