I don’t think any confirmation will come before election is concluded.
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Hi. How do you see the result? On the face of it, seems negative, but market has not responded likewise. YoY sales were materially low may be due to restriction on export sales.
Govt has restricted ethanol production so sugar production has gone up… but sugar sale quotas are also controlled and hence sales are down but sugar stock has gone up.
DBOL has more than 1,000 cr worth of sugar stocks (much higher than last year), even ethanol stock has gone up… this will lead to higher sales in Q1 and Q2 - that too at higher sugar prices so the company will benefit. effectively about 400 cr of sales (and 40cr of profit) which could have been done in Q4 has gone to next year.
Recovery has gone up by 0.9% - which is huge jump… this has led to higher margins in Q4 and margins will be higher in Q1 and Q2 also. Next year recovery will be even higher as last year, more farmers have replaced cane variety.
even grain based ethanol wll add to sales and profits in FY 25.
3 Likes
DBOL investor presentation is not well presented. to regular shareholders like us it is too complicated…
they should capture production, sales, opening stock, etc very clearly… instead of giving some many complicated graphs !!
1 Like
Concall was very good. As usual, MD was answering all questions… a totally hands on leader.
Inspite of challenging year due to decline in cane production, the company has done very well. As i had mentioned in earlier post, sales has got pushed to next quarter due to domestic sugar quotas being lesser.
Very simple way to look at this the increase in stocks over last year - that will be the incremental sales in H1 FY 2024 over previous year. If the company was allowed to sell the sugar it produced, PAT would have been Rs 114cr in Q4 (and not 39cr) - 34crs more than Q4 FY 23. - calculations given below:
| A | FY 23 | FY 24 | stocks higher by | Unit price | incremental sales in H1 |
|---|---|---|---|---|---|
| sugar ( tons) | 1,47,000 | 2,69,459 | 1,22,459 | 39500 | 4,83,71,30,500 |
| ethanol (mn litres) | 5.54 | 7.74 | 2.2 | 58.8 | 12,93,60,000 |
| 4,96,64,90,500 |
So sales in H1 will be higher by 500 cr -ie. it will be Rs 1,621 crs compared to 1,121 cr previous year. Since realisation of sugar in April (and going forward) is Rs 39.5 per kg upwards compared to Rs. 38.8 in Q4, operating margins will be higher by at least 2% over Q4.
Hence in H1, we can expect increase of Rs 100 crs in operating margins (500cr * 20%) - which will more than compensate for decline in profits in Q4 FY2024.
Simply put if the company was allowed to sell the sugar it produced, operating profit would have been 181cr in Q4 (and not 81cr) - 65crs more than Q4 FY 23, and PAT in Q4 would have been Rs. 114 cr and not Rs 39 crs as reported
Since the sugarcane output is expected to increase in FY 25, financials will be much better going forward. The company has incurred all the capex required - now only needs to increase cane supply.
Grain based ethanol and further increase in recovery next year will be additional profit boosters…
If one waits for a year, the stock can give very good returns - compared to its peers and also to the market overall.
7 Likes
Got the time to read the DBOL concall and view the ppt. I believe the detailing was great and the results were better than expected. Sugar realization is nullifying the ethanol ban from B heavy molasses and syrup. The reason they were unable to sell more sugar was to comply with government’s release quota.
All sugar companies are facing same issue of carrying stocks… but once exports are allowed share prices will go up… most likely in june exports will be allowed once domestic demand comes down. also elections will be over by then…
Domestic quotas are also about 10% higher than last year so stocks will come down… inspite of 10% higher quota wholesale prices are high - demand must be much higher.
Per capita consumption of sugar in India is only 20 kg against world average of 24 kg (developed countries >30kg). Going forward demand of sugar will increase.
It is just wait and watch for the sector.
Next year sugarcane output is likely to be higher then ethanol will also be allowed…
1 Like
While no exports is being allowed, ethanol procurement will continue so from oct onwards sugar sector will be back on track.
3 Likes
Was planning to write on reasons why Dhampur Bio is underperforming and we have to be patient - and the stock moved a lot !! Nevertheless writing my points (from investor presentation and concall)
DBO has underperformed due to following reasons:
-
Lower cane crushed in FY 24 - inspite of 30% increase in crushing capacity. It seems some error in calculations/ strategy error. Since acreage is not going to increase this year also (SS 25) it seems the crushing capacity will be under utilised for a couple of years.
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Plan for new Ethanol plant was postponed indefinitely. Ethanol is the margin and cash driver of sugar companies so postponing expansion was negative.
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Part of the existing ethanol plant is being converted to maize based ethanol. With govt expected to allow sugar diversion for ethanol in coming sugar season then plant will be fully utilised using sugarcane juice/ molasses- and again maize-based portion will be unulised. Maize based ethanol has much lower margins.
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Pharma grade capacity is also under utlised and if cane crush doesn’t increase then it will continue to be underutilized.
Performance of the company has been hampered due to lower recovery (due to red-rot) and underutilisation of plants. When both of these will be sorted out then financial performance will improve substantially. May take a year so its wait and watch.
Ideally they should have not expanded crushing capacity and not converted existing ethanol plant - instead they should have set up the new ethanol plant with same money.
4 Likes
114 seems to be a good support.
Hello,
In the below tracker, I have started tracking important company goals for EID Parry.These goals are referred to as ‘monitorables’ in the tracker.I will update this document regularly to reflect the current status of these goals.
Here’s a snapshot of what the tracker includes:
- Company Ticker: For identifying the company
- Monitorable Description: Description of the goal or metric being tracked
- Date of Announcement: When the monitorable was announced
- Deadline: Target date for achieving the monitorable
- Status: Current progress (e.g., Not Fulfilled, Pending)
- Verification Link: A link to see where I got the information about the goal.
I hope this information makes it easier to observe how well companies are progressing towards their stated goals.
Screenshot of the tracker below:
Full tracker attached below:
Tracking Company Monitorables.xlsx (123.1 KB)
5 Likes
Great work Aadhar. Would you consider making this a Google Sheet? You could share the Google Sheet as “view only”.
That way folks can see your updated sheet live.
@amit.wilson
Hi Amit. Kind words.
I’m still refining the structure of this tracker. I can send you a weekly email with the updated tracker though if you want. Please DM your email.
Aadhar
MSP increase will not be as high as industry expectation of Rs. 40 plus. At best it will be Rs37/38 - mkt prices are higher than this. However, it is very positive step as companies will be assured that they will not face losses.
1 Like
What is the current msp , can u give me details
All sugar companies are holding high sugar stocks. And with low ethanol production & sales in Q1 & Q2, it seems Q1 (and also Q2) financial performance is going to be very poor across the board… but again long term i think should be good.
Companies not going for expansion but focusing on efficiency and cash flow (and share buy back) will do very well. If margins on grain based ethanol do not improve then even repayment of debt can become a challenge. Once some ethanol capacities (both cane and grain based) shut down then the industry balance will be achieved.
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Higher sugar stocks were mainly the results of lower sales quota granted in the Q4 of last year. Don’t you see any chances for increase of sales quota for Q1 and resulting higher sales and higher profits as prices have more or less remained firm? Also do you have any idea of overall capacity of grain based ethanol in the country? Suppose the government keeps the restriction of ethanol produced from B heavy molasses intact, is it possible to meet the target of 20% blending in 1 year. (Is the production capacity of grain based and multi feed distillery in the country enough to meet these targets?)
1 Like