Cash Margins increased. Analyst advising to go loooong.
THE WAY FORWARD:
The sugar stocks have advanced 20-30% in the past 2 weeks, sugar price is inching towards Rs 40 , so what’s the way forward ? How long will this good times last ? Is there a structural change ? Or its a short term episode ?
There are early pointers to a structural change
Debt restructuring or market gains :
Apart from a few topline stocks like balrampur most of the sugar companies carry heavy debt on their books. Some like Oudh still are at negative networth. The govt support towards the industry is not going to end anytime soon. Why ?
Apart from the UP based companies, companies based in Maharashtra, Karnataka, TN have struggled to pay even this years cane price to the farmers. This is due to high debt levels and loss accumulated in the past two years. If the govt decides to reduce the sugar market price by allowing cheap imports , these companies will be in a even deeper pit next year.
The govt can either write off their loans or allow them to repair their balance sheet by allowing them to realise higher margins and realisations from the market. The first option is not feasible. The second option of allowing the companies to earn is the ONLY option.
While this year due to reduced volumes the companies may recover only their cost. These high sugar prices will be sustained for 20-24 months, that is for the next TWO YEARS. The govt has no other option but to allow this,the sugar companies earn back and recoup their losses ,wipe their debt and build up their cash levels.
The UP stocks have a higher advantage of earning this year and next year until 2019 cycle. Their rerating is justified and has only begun. Comparing with previous sugar cycles, there is a very long runway ahead. As earnings pour in …it will be quite a sight.
We have to wait a little longer for beaten down stocks like Renuka . Probably by aug-september the market will start recognizing it.
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There is a big upside in renuka…but have to wait a little longer compared to UP stocks.
and this would happen only when they are able to sell off its subsidiary…is something expected to come by 23rd January? 
The banks consortium has already taken control of renuka do Brasils operations. Shree renuka won’t get anything from the restructuring, but its Renuka do brasil debt will be gone.
Renuka will have Renuka do ivai in Brazil with 1000cr debt. Its huge crushing capacity in India will start factoring in from late this year.
Hi, Good writeup .
Regarding Shree Renuka if you take out Renuka do brazil out of the equation its crushing capacity and cogen its similar to dhampur. Dhampur has a much stronger balance sheet and revenue visibility. It has no subsidiary hangovers.
Absolutely right. When I first looked at renuka there was a chance that it could retain one of the do brasil mills. But now its crushing capacity is similar to dhampurs. But renuka will perform better in the next cycle. Rest of the thesis, reasons for investments are still there.
Govt draws contingency plan: With retail prices in the vicinity of Rs45/Kg, Govt asks ISMA for explanation and warned against speculation. In turn ISMA cautioned its members and passed on the Govt warning that price rise is alarming. This is likely to result in sugar cooling off in very short term and long term bullishness of price rise is imminent.
UP based mills in Sweet spot 
Hi,
iThought doesn’t feature in the shareholding list of Renuka Sugars. Can you confirm the source please.
Regards
Krishna
Renuka’s Madhu Plant Auction suspended following BNDES request
São Paulo, 23/1 - The auction of the Madu Plant, Renuka do Brasil, which would occur on Monday, 23, was suspended by court order and has no new date to occur. The request for suspension came from the National Economic and Social Development Bank (BNDES) on July 16, and the São Paulo Court of Justice granted the suspensive effect. Holder of the mortgage guarantee of the industry and creditor in the process of judicial recovery of the sugar and alcohol company, BNDES had already requested the cancellation of the first auction of the unit in December. At the time, the TJ-SP denied the request.
According to sources close to the negotiation heard by Broadcast Agro (real-time news service of Grupo Estado), Renuka do Brasil entered on Thursday, 19, with a request for reconsideration of the judicial decision. Should this request be accepted, the company will again need to set up a tender for the unit’s auction, which would take “a few weeks,” explained one source.
Located in Promissão (SP), the Madhu Plant has an installed capacity to process 6.5 million tons of sugarcane per crop. The industry will be sold as an Isolated Productive Unit (UPI), without any problems for the buyer. The first attempt to sell took place on December 19, with a minimum bid of R $ 700 million. Uninterested, a new auction had been rescheduled for Monday with free bids, but now the sale of the industry is on hold.
Renuka do Brasil filed a petition for judicial recovery in October last year. In addition to the Madhu Plant, he also manages Revati, in Brejo Alegre, in the interior of São Paulo. Both units can process more than 10.5 million tons of cane per season. Together with Renuka Vale do Ivaí, which has two plants in Paraná, Renuka do Brasil is controlled by the Indian company Shree Renuka Sugars, which is listed on the Mumbai Stock Exchange in India.
ET:Delay in import of raw sugar can have multiplier effect on world market: Narendra Murkumbi http://economictimes.indiatimes.com/news/economy/agriculture/delay-in-import-of-raw-sugar-can-have-multiplier-effect-on-world-market-narendra-murkumbi/articleshow/56783110.cms
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Very disappointed with lack of communication from Renuka. Its not clear for how long this issue will go on. Only thing murkumbi wants now is imports to be allowed. To make money with refineries. The only saving grace.
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So finally ISMA admits that sugar production is going to be just 21.2 million tons…they had since long stuck to an estimate of 23.5 million tons despite a lot of evidence to the contrary.
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Any sugar stock result so far?
Yep Dalmia Bharat, fantastic results
http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/4AEF31CF_A24C_4816_B87A_8F8C5928EB77_165743.pdf
Daily chart of Dhampur…once the stock breaks through the upper median line in the next few days, then the action shifts to monthly charts…
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Mehnaz, can you please post the monthly chart with the likely target projections?