Dalmia Bharat Sugar - Q4FY21 First Cut - ICICI Direct

(CMP - Rs. 329, MCap - Rs. 2660 crore)

Dalmia Bharat Sugar posted strong set of results with 32.7% growth in operating profit.

Q4FY21 Earnings Summary

- Consolidated revenue witnessed de-growth of 11.1% to Rs. 488.8 crore mainly due to absence of exports volume given announcement of export subsidy was delayed by three months in current sugar season. We believe exports would be largely booked in Q1FY22. Sugar sales was down by 18% whereas distillery sales was up by 23.2%. The company sold 1.0 lakh tonnes of sugar during the quarter mainly comprising of domestic volumes. Distillery volume increased by 10% in Q4

- Operating profit saw a growth of 32.7% to Rs. 127.2 crore on the back of increasing distillery volumes & higher proportion of B-heavy ethanol. Depreciation & income tax provisioning increased significantly during the quarter resulted in 16% decline in net profit to Rs. 51.9 crore

- The company generated Rs. 345 crore of operating cash flows in FY21 & also repaid ~Rs. 280 crore of debt. It declared a dividend of Rs. 3/ share

- Dalmia has completed expansion of its Distillery at Nigohi plant from 60 KLD to 100 KLD during the quarter. The company is increasing its annual distillery capacity from 8 crore litres to 15 crore litres in next one year

Dalmia Bharat Sugar is one of the most aggressive companies in expanding its distillery capacities to utilise the B-heavy & Sugarcane Juice route to produce ethanol. Sugar industry has been benefited by 2018 bio-fuel policy, which targets to blend ethanol with petrol to 10% by 2022 & 20% by 2025. Sugar Industry is taking massive capacity expansion to utilise this opportunity. We believe the sugar companies would be able to significantly improve their earnings trajectory by increasing distillery volumes. Moreover, higher global sugar prices have helped sugar companies to reduce their excess sugar inventory by exporting additional quantities. We believe the company would have been benefited by its location (two of its mills are located in Maharashtra) which would have helped it export additional white sugar (premium to raw sugar). We remain positive on the company due to its distillery expansion plan & strong balance sheet.

We will be coming out with a detailed update soon.

Shares of Dalmia Bharat Sugar and Industries Ltd was last trading in BSE at Rs.328 as compared to the previous close of Rs. 328.65. The total number of shares traded during the day was 33071 in over 1383 trades.

The stock hit an intraday high of Rs. 337.5 and intraday low of 321.7. The net turnover during the day was Rs. 10910865.

Source : Equity Bulls

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