Dwarikesh Sugar - Q1FY21 Result Update - ICICI Securities
Dwarikesh sugar (DWSL) reported sturdy results with 16.2% revenue growth aided by higher sugar & distillery segment sales. Sugar sales was up by 13.1% driven by higher sugar exports & higher sale of molasses given the company have crushed record sugarcane this season. However, sugar realisation were down by 1.1% to Rs. 31.3/kg. Sugar sales volumes increased by 4% to Rs. 1.25 lakh tonnes in Q1FY21 vis a vis Q1FY20 which included 0.6 lakh tonnes of exports. Distillery segment sales increased by 70.9% to Rs. 20.8 crore driven by higher volumes as company commissioned new 100 KLD distillery in December 2020. Though distillery volume were higher by 57% to 0.44 cr litres, it is much lower than the capacity of producing 1.0 crore litres every quarter. We believe lower offtake by OMCs due to their constraints of storage impacted ethanol sales. Power segment sales volumes increased from 2.7 crore units to Rs. 4.4 crore units as company crushed 20% higher sugarcane in current season. Operating profit was higher by 38% to Rs. 50.2 crore with higher sugar & ethanol sales. Net profit declined by 9.2% to Rs. 18.1 crore due to tax reversal in base quarter.
Valuation & Outlook
DWSL is one of the most efficient sugar companies with lowest cost of production given more than 12.2% sugar recovery. The company has only Rs. 224 crore of term loan at a concessional interest rate. Moreover with strong Rs. 170 crore operating cash flow generation in FY21E & FY22 each, the company would be able to reduce its peak working capital debt requirement by Rs. 250 crore by March 2022. We value the stock at 1.2x FY21 book value with a target price of Rs. 38/share and have a BUY recommendation.
Shares of DWARIKESH SUGAR INDUSTRIES LTD. was last trading in BSE at Rs.25.4 as compared to the previous close of Rs. 24.65. The total number of shares traded during the day was 173579 in over 580 trades.
The stock hit an intraday high of Rs. 25.7 and intraday low of 24.1. The net turnover during the day was Rs. 4343119.
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