Dwarikesh Sugar - Q1FY21 First Cut - ICICI Securities

(CMP - Rs. 25 MCap - Rs. 468 crore)

Dwarikesh Sugar witnessed strong revenue growth of 16.2% aided by higher sugar volumes & distillery sales

Q1FY21 Earnings Summary

- Revenue grew by 16.2% to Rs. 440.3 crore on the back of higher sugar volumes aided by ~55,000 tonnes of sugar exports during the quarter. The company's domestic sales quota was lower in Q1 due to sudden demand destruction from bulk consumers (Carbonated drinks & ice cream companies) in April & May due to lockdown. However, higher exports more than compensated the decline in domestic volumes. We believe sugar realisation would be close to Rs. 32 / kg during in Q1 as sugar prices decline to Rs. 31/kg in April & May before recovering to Rs. 33 / kg in June

- Distillery sales increased to Rs. 20 crore in Q1 as compared to Rs. 12 crore in corresponding quarter with commissioning of 100 KLD plant in December 2019. However, We believe volumes are still lower compare to addition in capacity. The lower sales would have been impacted by lower offtake from OMCs in April & May mainly due to constrains of storage capacity. Power segment sales stands at Rs. 13.5 crore impacted by cut in power tariffs last year. We believe volume would have also been down as company may have sold more quantities of bagasse in open market

- Operating profits increased by 38% mainly due to higher sugar exports & increase in distillery volumes in Q1. Net profit declined by 9.2% as base quarter accounted for income tax reversals

With the 1.4 lakh tonnes of sugar exports in 2019-20 sugar season & sugar sacrifice for the production of B heavy ethanol, the company has liquidated substantial inventory in current sugar season. Moreover, with the best sugar recovery of 12.2%, Dwarikesh sugar is lowest sugar producer in the country. Also, the increase in distillery capacity in December 2019 is likely to result in substantial increase in operating profit in FY21. With the government move to increase sugar MSP (Minimal Selling Price) & extension of sugar exports in 2020-21 sugar season, the industry would be able to see stable earnings growth in future. We remain positive on the stock and we will be coming out with the detailed update soon.

Shares of DWARIKESH SUGAR INDUSTRIES LTD. was last trading in BSE at Rs.24.9 as compared to the previous close of Rs. 26.2. The total number of shares traded during the day was 152333 in over 591 trades.

The stock hit an intraday high of Rs. 26.7 and intraday low of 24.9. The net turnover during the day was Rs. 3887175.

Source : Equity Bulls

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