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

(GSrikan) #1295

This is extract from Dhampur’s presentation. The power & Distillary are contributing more to profits than last year due to more operational days of sugar crushing, lower molasses price, higher ethonol production etc.

The fixing of lower limit of sugar price @29 rs & other measures by govt seems to giving support for sugar price (31.5 rs/kg according to presentation).

According to Presentation: Dhampur is expanding distillary capacity from 3 to 4 lakh ltr/annum. Considering increasing it by 1 lakh ltr/annum more.

Dhampur is Paying off long term debt slowly and also reducing the short term debt.

The rupee depreciation & high oil rates should support the ethanol blending program & sugar exports.

Need to track how ethanol blending program progresses. The sugar industry re-rating depends on the success of this program.

The bumper crop of next year would increase the cost of holding big inventory in the form of increasing the interest burden, which is the primary negative I can see.

So far things are looking good or may be I am missing something which market knows.

Discl: Have only basic understanding of sugar sector & investing. Invested in Dhampur @200.
Edits: Distillation capacity related mistakes; million -> Lakhs; 3 lakh to 4 lakh; Apologies for wrong info

(Raj A A) #1296

(Mehnazfatima) #1297

Finally a breakout in Praj…I still think it would be more profitable to play Praj rather than sugar stocks to benefit from the ethanol procurement policy of Govt…

suagr cmpanies are supplying around 140 crore liters of ethanol to OMC now…this may go up to 160 crore liters approx after increase in ethanol procurement price by Govt…

the increase is around 5 ruppes per liter…so the industry gets additional 800 crores from ethanol in this year…quite good but not good enough to cause a cyclical turnaround

Hence I recommend Praj once again

(Raj A A) #1298

(Rajesh) #1299

Can anyone throw some light on companies gaining most by recent decision of government increasing ethanol pricea by 25 %. Actually this increase is only for companies making ethanol by sugarcane juice not molasses. Also the company will not make sugar at all.

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