Sugar stocks in demand; Balrampur, Dalmia Bharat, Triveni gain up to 10%

ICICI Securities believe domestic as well as global sugar prices would remain firm at least for next one year

Shares of sugar companies were in focus with most the frontline stocks trading higher by up to 10 per cent on the BSE in Thursday’s intra-day trade on expectation of the domestic as well as global sugar prices to remain firm at least for next one year, due to lower inventories.

Balrampur Chini Mills, Dalmia Bharat Sugar and Industries, Triveni Engineering, EID Parry, Shree Renuka Sugars, Uttam Sugar Mills, Avadh Sugar, Dhampur Sugar and Dwarikesh Sugar were up in the range of 2 per cent to 10 per cent on the BSE. In comparison, the S&P BSE Sensex was up marginally by 0.03 per cent at 58,668 points at 12:29 pm. However, most of the sugar company’s shares were down by up to 20 per cent from their respective 52-week highs level.

The sugar industry has seen significant reduction in sugar inventory in the last one year, which along with the increasing sugarcane diversion towards ethanol is leading to increase in sugar prices. Analysts believe domestic sugar prices would remain firm above Rs 36/ kg for the rest of FY22, which would boost the profitability. Moreover, with the commissioning of new distilleries, the sector would be able to divert more sugarcane towards the production of ethanol.

According to ICICI Securities report, sugar Industry has contracted for 3.5 million tonnes of exports for the 2021-22 sugar season (SS2022). The sugar marketing year runs from October to September. Sugar exports this year are being undertaken without the government subsidy.

“With expected sugar production of 31 million tonnes (after the 3.4 million tonnes equivalent diversion towards ethanol), 27 million tonnes of consumption & 6 million tonnes of exports, sugar inventories are likely to come down from 8 million tonnes to 6 million tonnes. This would result in uptick in domestic sugar prices towards Rs 38/ kg in next 3-4 months”, ICICI Securities said in a note. “We believe domestic as well as global sugar prices would remain firm at least for next one year,” the brokerage firm said.