Dalmia Bharat Sugar - Result Update - ICICI Securities

Dalmia Bharat Sugar reported Q4FY20 results with a 3.3% decline in sales on account of 11.2% de-growth in sugar volumes. The company sold 1.27 lakh tonnes (lt) of sugar. It was allocated 0.98 lt of domestic quota, which implies it has exported 0.27 lt of sugar. This is significantly lower considering it is expected to export 1.49 lt in the current crushing season. We believe a significant quantity of this would be exported in H1FY21, which would result in liquidation of excess sugar inventory. The company crushed 48.5 lt of sugarcane in the 2019-20 crushing season. We believe it would have produced close to 5.5 lt in the 2019-20 crushing season. Diversion towards B heavy ethanol would have been close to 50% given two of its plant Jawaharpur & Nigohi in UP were producing B heavy molasses. These two plants crush close to ~25 lt of sugarcane in a year.

Valuation & Outlook

With the ~Rs. 450 crore of cash flow generation and no capex in the near term, the company is likely to reduce its working capital debt by ~Rs. 300 crore in the next two years. Dalmia also has investments (current & non-current) of ~Rs. 400 crore in the books. Given stable earnings, reducing working capital debt & investments, the stock is trading at attractive FY21E earnings multiple of 4.5x. We value the stock at 6x FY21 earnings with a target price of Rs. 150/share and with a BUY recommendation on the stock.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_DalmiaBharatSugar_Q4FY20.pdf

Shares of Dalmia Bharat Sugar and Industries Ltd was last trading in BSE at Rs.114.35 as compared to the previous close of Rs. 112.85. The total number of shares traded during the day was 94980 in over 1934 trades.

The stock hit an intraday high of Rs. 124 and intraday low of 112.85. The net turnover during the day was Rs. 11067789.

Source : Equity Bulls

Keywords