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

Stock Opportunities
1728

How do you see pure play Sugar stocks like Ponni Erode ?

1 Like
1730

pl go through Investor call recoding of Dhampur Bio. Salient points:

  • Cane crush quantity for this season - no guidance as not sure.
    Cane crushing capacity was increased from 22,500 TPD to 27,000 TPD but cane crushed has not increased. Even cane crush days will not come down (as per concall) then what was the use to investing Rs 60 cr in increaseing crushing capacity

  • Recovery - cant say right now. too early

  • Distillery - will remain underutlised inspite of capex of 50cr for grain based modification. they could not bid for maize based ethanol as plant was not ready!! Management view - Maize prices are anyway going to be very high… but if it comes down due to some reason like imports… then also they will not be able to make ethanol from maize !!

  • Company has plant for pharma grade sugar exports - but exports are banned ! so realisation is not as expected. Dont know how much was spent forr pharma grade refinery… should not be less than 50 to 100 Cr

  • Focusing on country liquor - but realisation is falling…

  • What is to be done with profits/cash as there is no capex - this is most convoluted reply i have ever heard.

Effectively about Rs. 200 crs of capex is not yielding any incremental revenue/ profit for the company. Unnecessary annual cost of 30 to 35 crsby way of depreciation and interest.

Lots of promises but poor delivery… company has potential but something or the other goes wrong… is it bad luck or bad management?

1 Like
1731

I do not track this company.

1732

MD of Dhampur Bio made the same point - crude oil prices have come down so it will be difficult to increase price of ethanol but ISMA is trying to push for at least a few Rupees increase. But with oil prices going down even more - this will also not be possible.

1 Like
1733

i have invested in dbol ,as i feel it offers great value at lower 120 levels ,we are probably at the bottom of the cycle .when it reverses is anybodys guess.

1734

yes… it is a good level to buy… but given market sentiment it could go to 100 levels this time. This is because of overall excess capacity in ethanol and high sugar stocks due to extremely bad Govt. decisions…
India is importing maize for ethanol and keeping sugar in stock (at record levels) when international sugar prices are high… maize ethanol is Rs. 72 per liter and cane based ethanol at Rs. 60… this is an example of buying high and selling low !!!

1 Like
1735

https://www.orfonline.org/expert-speak/ethanol-blended-petrol-for-energy-security-india-s-self-goal#:~:text=India%20usually%20exports%202%20MT,self-reliance%20by%20reducing%20imports.

Unbiased fact based report. Highlights what the Govt is doing wrong.

3 Likes
1736

This is a good example of wrongs in ethanol procurement. When sugar stocks are high in country, players are still resorting to import of corn and maize for ethanol production since procurement prices do not make any sense

1737 
Certain spik on sugar price at international market:
DATE : NOVEMBER 19TH 2024 TUESDAY.

M A T SONS, CHENNAI.

YESTERDAY NIGHT INTERNATIONAL MARKET CLOSING RATES ARE AS FOLLOW.

LIFFE REFINED SUGAR (LONDON).
MAR 25 : 573.50 + 18.50
MAY 25 : 566.90 + 16.10
AUG 25 : 551.00 + 13.30

ICE RAW SUGAR (NEWYORK)
MAR 25 : 22.20 + 0.62
MAY 25 : 20.65 + 0.55
JUL  25 : 19.84 + 0.48
1741

players have been forced to import as maize is not available at high price also. Even with imported maize they are making loss - but they have to meet commitment of ethanol supply or we will not met 20% blending target !! so to support them Govt has increased maize ethanol price to Rs. 72 / litre and forced sugar companies to shut ethanol plants and keep high levels of sugar stocks…

2 Likes
1742

Domestic sugar prices are falling. international prices have no impact on sugar companies as export is not allowed. Most likely realisation of sugar companies will come down in coming quarters.

2 Likes
1743

most of the sugar scrips have fallen a lot… now is the time to take a risk and buy.
medium term positives:
most likely govt will allow exports of some sugar which will improve margins.
marginal increase (Rs 2 to 3) in ethanol prices will have to be done as cane prices have gone up.
Maize ethanol share will come down from 55% to 30to 40% as some plants will convert to ENA and some may even shut down.
maize prices expected to come down by April / May due to imports and then sugar mills can produce ethanol from maize.

Risk-return at these prices is decent now.

2 Likes