Sugar stocks extend rally; Triveni, Dhampur, Uttam Sugar zoom up to 18%

Shares of sugar companies continued their upward movement rallying up to 18 per cent on the BSE in Monday’s intra-day trade due to heavy volumes on strong outlook.

Union minister Nitin Gadkari on Saturday said top officials of automobile companies have promised him that they will start manufacturing vehicles of flex-fuel variants within six months. Flex-fuel, or flexible fuel, is an alternative fuel with a combination of gasoline and methanol or ethanol.

The road transport and highways minister said companies like TVS Motor and Bajaj Auto have already started producing flex-fuel engines for their two and three-wheelers. According to Gadkari, soon most vehicles in India will run on 100 per cent ethanol, PTI reported. CLICK HERE TO READ FULL REPORT

Triveni Engineering & Industries, Dhampur Sugar Mills, Uttam Sugar Mills, Dalmia Bharat Sugar and Industries and Avadh Sugar & Energy surged between 11 per cent and 18 per cent on the BSE.

Mawana Sugars, Magadh Sugar & Energy, Addhra Sugars, Dwarikesh Sugar Industries and Balrampur Chini Mills rallied in the range of 5 per cent to 10 per cent. In comparison, the S&P BSE Sensex was up 0.78 per cent at 55,981 points at 11:18 am.

With a favourable mix of ethanol towards B-heavy/juice (feedstock) coupled with higher sugar realisations, operating margins of sugar companies are expected to improve.

Ethanol demand should grow at a 15 per cent CAGR over FY22-30E driven by the government’s mandate of 20 per cent ethanol-blending in petrol. Further, higher diversion of cane towards ethanol will solve the problem of surplus sugar inventory and reduce business volatility, said brokerage Systematix Shares and Stocks in a February report. 

Improved profitability and reduced working capital will ensure superior cash flows, which along with the improvement in RoE/RoCE, would lead to sector re-rating, the brokerage added. 

According to ICRA, tailwinds from global sugar demand supply balance driving exports and higher sucrose diversion towards ethanol would allow the industry to curtail its closing inventory levels, which in turn would result in lower total debt, despite ongoing debt-funded distillery expansions.

Reduced debt levels in addition to expanded operating profits emanating from favorable pricing as well as increased share of ethanol in revenue mix would support industry’s credit metrics despite recent hike in cane prices that can constrain profit expansion to an extent, the rating agency said in a recent note.

COMPANY	LATEST	PREV CLOSE	GAIN(%)
Triven.Engg.Ind.	349.00	303.25	15.09
Dhampur Sugar	514.90	451.40	14.07
Uttam Sug.Mills	260.15	233.60	11.37
Dalmia Bharat	507.05	461.15	9.95
Dhampur.Spl.Sug.	46.35	42.25	9.70
Avadh Sugar	766.45	699.20	9.62
Mawana Sugars	167.65	153.35	9.33
Magadh Sugar	352.45	322.55	9.27
Indian Sucrose	82.40	75.70	8.85
Rana Sugars	34.55	31.90	8.31
KM Sugar Mills	35.30	32.95	7.13
Ponni Sug.Erode	281.50	263.50	6.83
KCP Sugar &Inds.	29.70	28.00	6.07
Dwarikesh Sugar	136.45	129.15	5.65
DCM Shriram Inds	108.00	102.70	5.16
Rajshree Sugars	35.70	34.00	5.00
Ugar Sugar Works	67.25	64.05	5.00
Simbhaoli Sugar	24.90	23.75	4.84
Vishwaraj Sugar	24.70	23.60	4.66
Riga Sugar Co	11.15	10.66	4.60