Dalmia Bharat Sugars - Sweet as SugarCane!

Hi ValuePickr Members, this is the first conversation I am starting here. Has worked on this company Dalmia Bharat Sugars and have attached the copy of my work (Report will be few days back).

Dalmia Bharat Sugar FY14 Annual report highlights its foray into Maharashtra and its strategy to scale up its capacity further in the State.

Company Background: Dalmia Bharat Sugar is UP based integrated sugar manufacturer with cane crushing capacity of 27300 tcd, cogeneration capacity of 94MW and distillery capacity of 80KLPD with plants located at Ramgarh, Jawaharpur, Nigohi and Kolhapur. Company also owns 16.5MW wind farm in Kerala and Magnesite mines with capacity of 72000tpa in Salem, Tamil Nadu.

Facing West through Kolhapur Acquisition: During FY13, company acquired a sugar mill located at Kolhapur with capacity of 2500tcd for total consideration of Rs 125.5crs (which includes total consideration of Rs 108crs and outstanding liabilities of Rs 17.5crs) which works out at Ev/ton of Rs 5 lakh/tcd. During FY14, company scaled up the plant to 4800tcd capacity with 15MW cogen plant to support internal requirement and achieved peak recovery of 13% highest in the industry. Going forward full benefit of co-gen and expanded sugar capacity in Kolhapur will be seen during the next financial year 2015.

Key Initiatives during FY14:

Improving sugar recovery: In UP operations, company has been able to improve its recovery from 9.4% to 10.09% this sugar season while at its Kolhapur unit company recorded recovery of 13.17% this season.

Forays into Maharashtra: Company successfully integrated and expanded its capacity at Kolhapur. Companyâs strategy is to build scale in the State by consolidating the fragmented co-operative sector in the region.

FY14 Performance: Revenue grew +19% yoy to Rs 1192crs primarily on account of increase in sugar sales volume by +31% yoy. Sugar production grew +5% YoY to 2.92 lakh ton. Ebitda were lower at Rs 108crs, declined by -25% yoy. Contraction in Ebitda was mainly on account of sales of high cost sugar inventory of FY13. Sales realization/ton was down by -4% yoy while the cane prices remained unchanged at Rs 280/quintal. However, Ebitda from Distillery segment were at Rs 29crs driven by +17% yoy growth in realization while its Cogen Ebitda were at Rs 92crs with power realization at Rs 4.28/unit vs Rs 4.18/unit last year.

Balance Sheet: Companyâs Consol Networth stands at Rs 462crs vs Rs 458.7crs yoy. BVPS at Rs 57.1 vs Rs 56.7 yoy. Gross debt stands at Rs 812crs vs Rs 786crs yoy. Of which LT debt stands at Rs 527crs vs Rs 343crs yoy and ST debt stands at Rs 223crs vs Rs 443crs yoy. D/e edged higher at 1.76x vs 1.71x yoy. Cash equivalent of Rs 111crs vs Rs 71crs yoy of which Current investments were at Rs 63.5crs (vs Rs 44crs yoy) and Cash at Rs 47.7crs (vs Rs 26.9crs yoy)

Cash flow: Company continues to post positive operating cash flow (OCF) over last 4 years and FCF positive for last 3 out of 4 years. In FY14, company generated OCF of Rs 266crs vs Rs 95crs YoY and FCF of Rs 91crs vs âve Rs 48crs YoY.

Key Points from MD&A

During FY14, India faced oversupply of 5MT of sugar for which Govt, proactively allowed raw sugar exports which supported sugar prices. However, high cane prices led majority of the mills in UP to post losses. Although, there were slew of positive structural changes took place this year like decontrol of sugar prices, mandatory blending of ethanol, abolition of levy sugar and monthly/quarterly sugar release mechanism etc which gives hope for the future of sugar industry. On Cane pricing, UP Govt. maintained its SAP for SS14 at Rs 280/quintal but provided some relief in form of exemption of certain taxes.

Outlook: Companyâs diversification and expansion plan in Karnataka is on schedule and full benefit will accrue this fiscal. With lower crushing this season and lower sugar inventory, company expects Sugar prices to remain stable. However, fixation of Cane Price in UP for Sugar Season 14-15 will be key moniterable going forward.

Valuation: At CMP of Rs 22, stock trades at Ev/Ebitda of 6.15x and PBV of 0.37x its FY15e Ebitda and latest book value. On Replacement Cost basis, company is trading at 48% discount to its current EV vs its peers which trades at discount of 3% to 30% to their EV. Also on PBV as well as Ev/Ebitda basis, it is trading at significant discount to its peers. Given the positive changes taking place in Sugar sector, we believe the discount to its Replacement Cost will narrow down which will provide multiple upside from current level.

Comparative Analysis

Dalmia Sugars


Bajaj Hindustan

Shree Renuka

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The share has fallen quite a bit from 188 to 104 on bad results, wonder if anyone else is still tracking the company/industry ? Can be a good bargain hunting on any further dips.

Dalmia Bharat Sugar and Industries
have 5 mills in operation with ~30000 TCD crushing capacity, they have good sugar recovery in UP at 11% and 13% in Maharashtra, the company have managed to post a positive bottom line in the worst of times , in sugar sector when most of its peers posted losses, by last years good run on sugar prices,the company has manged to get thier debts down, this is the only sugar company where promoters have ~75 stake, this company is trading below its liquidation value ,while most others are trading twice to their book
Sugar cycle may have just reversed and the downtrend in sugar cycle may last 5-7 years from now.
Sugar production is expected to be a bumber this year and govt has taken out that 20% export duty on sugar.
But expecting this cycle to reverse in 2-3 season, this company may be the best player to buy in lower levels, and history is not going to repeat the same way, and believe something is going to be defferent this time
Due to debt reduction their net margins will improve, sugar consumption is going to improve over the years, last year their cash flows was a lot positive .
DISCLAIMER:Keeping the cyclicality of the buisiness in mind started to buy some shares below 600 crore market cap , and ready to accumlate over 2-3 down seasons , when sugar productions are high and sugar prices are low, i did not compare this company to larger players with 3000cr market cap and has different buisiness verticals like chemicals etc… My views can be biased and i’am alocating only a small portion of my portfolio in this cyclical play…

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Extract from Dalmia Bharat Q4 Press Release

Quarter Performance
Despite higher revenues, there was a steep drop in the profitability due to unprecedented fall in
sugar prices due to much higher sugar production in the season than anticipated. Consequently the
results reflect inventory Write down amounting to approx. Rs. 155 Cr.
In respect of operational front we have recorded the highest ever sugar production & power
generation. With respect to sugar recovery we continue to be amongst the best in the industry. In
respect of distillery segment which is likely to be the major growth driver in near future, we plan to
augment our value accretion by setting up 60 KLPD Distillery at Nigohi unit & expand our Jawaharpur
unit distillery capacity from 80 KLPD to 120 KLPD from the next season.

Outlook on Sugar Industry:-

Sugar segment outlook is extremely challenging with record estimated domestic production of 320
lac MT and forecast for similar or higher sugar production in the next sugar season also. In light of the
above it is very important that the Govt. urgently initiates measures like creation of buffer stock and
linking cane price with sugar prices to improve the fortunes of the industry.

Personal View - I believe challenges for the Sugar Industry is here to stay for the next 1 year at least unless govt changes its policy. I do not see govt dropping sugarcane prices too much specially with election due next year. Will continue holding for the time being, constitute 1% of my portfolio.

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Q1 profit rises to Rs 62.04 crore versus Rs 55.10 crore; revenue increases to Rs 653.30 crore versus Rs 636.55 crore (YoY).

Even if the company was not able to make a lot out of sugar, they managed to post exceptional profits by more than doubling their profits from power business and more than quadripling their distillery segment profits

Q1 FY19 results are uploaded below

3ae22130-cdff-4835-8720-d6be0b9cda21.pdf (1.5 MB)

I feel, Good set of Numbers by Dalmia Bharat Sugar. QTRLY PAT 46 CR (Yearly EPS of Rs. 23) that too after a setting off impairment loss of asset of 28 CR other wise profit would have been very huge.
Power Sales & Profit Up, Distillery sales & Profit Up.
Also there is Divident of Rs. 1.60 per share.
Disclosure: I have invested in Dalmia Bharat Sugar

I have created a semi-automated peer comparison sheet for most of the companies in the industry.

Sugar Industry Data.xlsx (359.1 KB)

You can find comparisons of more industries here:

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Non Promoter Acquisition

New product launch:



Good Read on Ethanol Procurement by OMCs

Another One on Sugar Cane Plant