Sugar Cycles: 7-8 years of losses followed by 2-3 years of super gains!

And here are the monthly charts Iwith momentum indicator) of three sugar stocks which are foremost in showing a turnaround…its quite possible that this leg of the sugar rally will be led by either one of the following three or all of them…just have a look at the charts…a picture is worth more than a thousand words…

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@Mehnazfatima ji. Rana sugars topline up by 186.3%. Net Profit/Loss Loss increased by 60%.
When most sugar companies making so much money, why Rana increasing losses? Is management reliable

It seems Rana sugars has been holding on to its sugar inventory instead of selling it in Q2…this is in violation of the central govt order…perhaps they are expecting a better price realization going forward…if so, the loss in the present quarter will be more than made up in the next 2 quarters…But still its a rsky strategy…

DSML posted a consolidated net profit of Rs 39.87 crore for the quarter ended September 30 on higher sales.

board meeting of BCM is scheduled to be held on November 15, to consider and approve the unaudited financial results for the quarter and half-year
ended September 30, 2016 (Q2).

In the said meeting, the board shall also consider a proposal for buy back of equity shares of the company and matters related/ incidental thereto.

Dhampur result is out, consolidated EPS for 6 months is 11.34 and Standalone is 11.66.

I am even more bearish now on sugar.

Amit Anam

Appreciate if u could outline your rationale please.

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Balrampur Chini Mills has posted a net profit of Rs 106 crore for the quarter ended September 30, 2016 as compared to net loss of Rs 13.6 crore for the quarter ended September 30, 2015. Share buy back offer @ Rs. 175 per share.

Balrampur Chini posts Rs 106 cr profit in July-Sep

Disclosure: Invested.

" After weeks of deliberations, the state government on Tuesday fixed Rs 2,500-Rs 3,150 as fair and remunerative price (FRP) for a tonne of sugarcane.
The rate was fixed at the meeting held by the Karnataka Sugarcane Control Board, comprising ministers, officials and farmer leaders."

Balrampur management interview with Moneycontrol. it is clarified that debt will be reduced by Rs 450 crores (Already Rs 400 cr retired). Going forward he is very optimistic abt the profitability in the coming period given FRP n demonitisation blues.

Dear Mehnazjii - Just needed your thoughts around a theory that i seem to be having. in view of the demonetization and less cash with the UP based politicos, can they up the SAP to pass more cash onto farmers leading to sugar mills profitability.

Invested in Dwarikesh, Dhampur and Balarampur

There is another way of looking at it…sugarcane farmers have two options…either to sell to sugar mills and get payment slowly and through banking channels…or the sell to jaggery makers at a lesser price and get the whole amount on the spot…

Now that the cssh oriented jaggery business is shut down…farmers will now be forced to sell more sugarcane to mills…its not a bad thing…in times of sugar shortage…

Hi Mehnaz,

Could you please share your opinion on the Dhampur Result ?

Any specific reason why the Power Business did not contribute to the results as compared to the corresponding quarter the previous year ?

Are the results in line with your expectation ?

I really appreciate the efforts that you have made in contributing towards our understanding of the sugar industry . Thank You.

Disc: Invested

Cogen power is generated only while the crushing is on. Once the crushing season is over in April snd the factories are closed, there is no power generation. Hence, only Q4 reports high cogen figures and then Q1 too may report some small amount of cogen power.

In Q2 and Q3…there is NIL power generation in all sugar mills.

hi Mehnaz,

On the technical front, looks like Dhampur has decisively broken 100DMA on daily chart after quite sometime. Does it signal a break in the rally for sometime now?

Regards,
Roberto el S

Hi fatima, is Ugar follwing the same strategy of holding the inventory. They too reported a loss and inventory up for last two quarters… !!

Yes…afraid for Dhampur…its not getting support…can fall to 97…after that its a steep fall to 84…thats a p/ e of just 2.5 to 3…

you are right…only saving grace is the p/e is 3.5

I think we may end up with a conservative estimate of full year eps of around 35-40 for Dhampur.

At CMP of around 105 the stock represents incredible value. In my honest opinion a stable company with secotral tailwinds in a industry with a demand supply mismatch should go for a lot more.

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Dear Mehnaz,

Thankyou for you regular updates and fantastic analysis on these stocks. Do you happen to have any idea why KM sugar mills have reported 50% less spending this quarter from previous quarters whereas other sugar companies have reported stellar quarterly returns? Are they hiding something. If they are, should we accumulate more of this stock and wait for their q3 result which will be significantly better then this quarter. Or am I missing something.

Thanks,
Rajan