EID Parry stock hits new high; soars 10% on hopes of improved profitability

EID Parry in its FY24 annual report said, operating profitability is expected to improve in FY25 and would remain rangebound, due to better profitability from sugar business.

Shares of EID Parry (India) hit a record high of Rs 859.90, as they rallied 10 per cent on the BSE in Monday’s intra-day trade amid heavy volumes on expectations of improvement in profitability. The stock of Murugappa Group company surpassed its previous high of Rs 833.30 touched on June 19, 2024.

At 01:44 pm; EID Parry was trading 7 per cent higher at Rs 837.60, as compared to 0.17 per cent rise in the BSE Sensex. The average trading volumes at the counter nearly doubled, with a combined around 3 million shares changing hands on the NSE and BSE.

 

EID Parry has six sugar factories having a capacity to crush 40,800 tonnes of cane per day, generate 140 MW of power and five distilleries having a capacity of 417 KLPD. In the Nutraceuticals business, it holds a strong position in the growing wellness segment mainly catering to the world markets with its organic products.

EID Parry in its FY24 annual report said, operating profitability is expected to improve in FY 2024-25 (FY25) and would remain rangebound, due to better profitability from sugar business, which would help partially offset impact, if any, of lower distillery volumes (higher margin) for ethanol blending.

The National Biofuel Policy announced by the Government recommends blending 20 per cent ethanol with petrol. For EID Parry, this presents an appealing opportunity since molasses are an important by-product for the company’s large sugar production operations. The molasses serves as the raw material for ethanol.

Despite the challenges, several opportunities existed for the company during the year under review, to enhance its performance and competitiveness by exploring opportunities for diversification beyond traditional sugar production, such as value-added products or alternative revenue streams. The company has recently set its footprint in the fast moving consumer goods (FMCG) space with the introduction of a wide range of staples viz., rice, millets, and pulses, EID Parry said.

The Indian government has showcased the intent to fasten the move to an ethanol-based economy, by advancing the 20 per cent ethanol blending target (with petrol) to 2025 from 2030. Additionally, the government has made supplies profitable by raising ethanol prices every fiscal, in addition to differential pricing for B-Heavy and the direct cane juice route and providing interest sops on loans for setting up ethanol-based distilleries.

The restrictions announced by government of India on diversion of sugar for ethanol production in ethanol supply year (ESY 2024) is expected to impact the profitability of the Company in near term. However, this is likely to be temporary and restriction expected to be lifted once sugar production normalizes in the domestic market. Since the sugar industry is highly regulated, any change in the regulatory stance and continuation of government support to sugar sector (including distilleries and ethanol pricing) are key monitorable, EID Parry said.