Studied this article in ET today : -
As per it, the inventory of sugar is going to be greater than domestic consumption this yr. Also the mills don’t have excess operating capacity to process the cane harvest. Going by this, wouldn’t the upside of sugar prices be capped? Not sure how much of excess cane production will be diverted towards Ethanol. Can the experts studying the cycle share thr inputs regardg this plz.
Sugar price is not going up in the domestic market anyways. It’s going up in the international markets and that’s why sugar stocks are buzzing.
March quarter is best for the sugar industry so this is like a trend that in Feb and March months, sugar stocks go up. See the last 5 years’ data ignoring 2020.
Domestic demand for sugar is 25-26 MT while production is estimated to be around 30-31 MT this sugar season. I am looking at what is going to happen in the next season (2021-22) and next season also sugar production is going to be on a higher level. Not many distilleries are going to come up next year so I don’t see any significant diversion from sugar to Ethanol. One can’t expect much from sugar stocks, they still remain cyclical and depend tremendously on government support.
this will help in increasing the ethanol allocation by OMCs from current 325 Cr litres to much higher. It remains to be seen how fast does this allocation increase.
Does anybody have a list of vehicles that can operate purely on E100?
Balrampur Chini comfortably trading at Life Highs
recently touched a high of 279
Meanwhile Dalmia Sugar cmp 230 is also at Life highs
Triveni Eng cmp 114 also at 12 year highs
Bit Surprised this Sugar Thread has gone quite
Last Cycle had learned a lot from here.
Posting Updated chart of Balrampur Chini
& New Report by Elara Capital
Sugar - Elara Securities - 27 April 2021.pdf (523.4 KB)
Won’t this be negative for sugar stocks if other mills have to cater to the oxygen demand?
I have been reading about sugar sector for the past few days in this thread and also some annual Reports.
Few points which I noticed are :
@Mehnazfatima , It was a pleasure reading through your journey in the previous sugar cycle. Thanks for sharing your candid views on this forum for others to benefit.
Would like to know your views on current rally in sugar stocks.
As a novice I am tempted to think there is a structural change, but your statement “except price everything is superfluous” makes me cautious!!
Few other points which I noted about BCML:
Topline contribution due to ethanol ~ 700Cr +
Sugar production forgone ~ 300 Cr +
With PBIT margin of ~40% ( previous year ~50%) ethanol contributes significantly to the bottom line even when topline contribution is <10%
Even during the price down cycle ( 2018 - till now ) BCML paid dividend , reduced debt, Bought back shares
So are we witnessing a structural change at least in efficient sugar+ethanol players ?
i wanted to share this much earlier. but was having issues with my login and pw reset
anyways. i have done some working on this sector
infact bajaj hindustan cab be a dark horse. its data i have not updated sheet which is attached here. but the group power plant is up and running for the last few years. there was a planned ipo for the same. its based on super critical tech.
I would like to point out a few things…
There is no upside breakout in price of sugar in domestic market. So there is no reason to believe that the profitability of sugar mills is going to increase hugely.
The price of the other commodity…ethanol is fixed by the Govt and that has not been increased.
India has been able to export around 6 million tons of its surplus sugar with the help of export subsidy. That has reduced the inventory in india and reduced the carrying cost of sugar mills
even if the global price increases, the domestic price need not go up because the govt usuallly imposes an export ban.
In brazil, there is flexibility even upto 100% ethanol blending. Yet the sugar sector in brazil continues to be a cyclical sector. I fail to understand how with 7-10% blending, Indian sugar sector will become a secular growth story.
So i do not believe in a cyclical turnaround in sugar sector…next year too, normal / excess rainfall is expected. Hence, the next sugar cycle too will see excess sugar production.
On the other hand, most sugar stocks have become good momentum plays. I like Uttam sugar and Dwarikesh sugar. I am holding Dwarikesh sugar and bought it just before upside breakout. I expect it to do quite well in the next few months.
@Mehnazfatima Do you feel it is too late to enter the sugar names? Or can we enter at small corrections?
I feel that its risky to enter cyclical stocks after they have rallied significantly. So pl decide for yourself
A good overview on Sugar industry
Isn’t this because demand for ethanol for blending in Brazil is not always in excess of the supply, as is likely going to be the case in India over the next few years? In India we know that supply will be short of demand if the policy is implemented, no?
Is there any legal compulsion for oil companies to blend ethanol ? I think, no. When oil price is higher, they will blend, if oil price is low and oil is cheaper than ethanol, they will not blend. This blending story is going around 18years. Look, how many distilleries erected before2006, what happened ? When sugar price is high, even sugar companies will not be interested to make ethanol. Everybody will forget this blending story like in past. For me, it is thes same story repeating again.
Same happens in Brazil, it depends on sugar and oil price what will be produced in sugar factory.
As far as India is concerned, even if 2,4 mt of sugar is converted to ethanol, how will it make a difference to overall sugar industry if you are producing 9mt more than your consumption. Also your cost of production is highest in world so uncompetitive. I beleive only in sugar price cycle, rest is illusion.
A good source bit old report but it is good report to have better understanding of sector
http://www.in.kpmg.com/pdf/indian_sugar_industry.pdf
Hello all,
Government has reduced export assistance for sugar from Rs. 6000/MT to Rs.4000/MT.
Do you think it’s a slight negative for sugar stocks in India as government might put up more regulations if prices start increasing for retail customers in India? Or should we continue to ride till the sugar prices continue to rise in global markets?
Thanks,
News article:
My humble opinion so far:
Protectionism is a risk. I would not ignore it. But government can’t stop rise of international sugar prices if it happens.
Banning export is too far ahead in the picture - they might start thinking if domestic sugar prices rise above a certain level.
They might reduce export support if sugar millers keep enjoying higher export prices. Govt is saving govt money in this way.
Even if export support come down to zero and international sugar prices support, sugar mills will keep exporting till it makes financial sense as they have good level of inventories.
We may need to keep an eye on protectionism dark clouds.
Lot of you might have seen in the previous cycle. Hence, would appreciate if you share your knowledge.
Thanks,
As per this news, out of existing quota of 6 million tonnes, 5.7 million tonnes have already been contracted at higher subsidy rate so it won’t impact exports this year.
