Sugar Sector: Some Surprising Ratios

Sugar scrips were down today along with rest of market. But look at following which will surprise you:

Company M/Cap(Crs) Assets Sales Profit CMP/52WHigh/52WLow

Balramchin 3224 3756 4285 570 146/167/66
Triveni 1698 2687 3181 220 57/78/36
Dhampursug 1015 2912 2754 254 153/252/80
Dalmiasug 728 2527 2018 187 90/136/52
Bajajhind 715 6803 8787 -64 6.30/12.1/6.30
Avadgsug 477 1940 2130 119 238/381/144
Dwarkesh 412 1099 1084 95 22/34/16
Mawanasug 129 957 739 34 33/73/33
KMSugar 60 269 390 24 6.60/14/6
—– —– —- —-
Total 8458 22950 25868 1439

You may buy 85% of Sugar producing capacity of entire U.P. state for just Rs 8458 Crs which produces 12 million tonnes which is worth Rs 37200 Crs @Rs31000/ton in a year (against 33 million tonnes produced by India). It needs an investment of roughly Rs 30000 Crs to create 12 million tonnes sugar production capacity, by that yardstick the U.P. mills are available for 1/3 rd of the capital expenditure needed to build them up (this is without cost of land). Mills have started to show profits after the incentives by govt and with ethanol initiative the profitability in future years is likely to improve. As we can see above, in a bad year too these companies have posted profits of Rs 1439 Crs on sales of 25868 Crs which can go up to Rs 2500 Crs in a normal year and as much as Rs 5000 Crs in bumper year. This industry can’t be allowed to remain sick by govt or will go out of fashion. In past these stocks have given gone up by 3 to 7 times of their lows, have given hefty dividends and bonuses. If one can acquire these in bad times and patiently sticks with them, he can be sure of multiplying investment. There is all one thing to care of, it is that you can buy these stocks slowly and build up quantity over time but not in a single day. Some game is being played by smart money at this stage to unnerve the ordinary investors with an aim to snatch sugar shares away from him. In this light have your own strategy to counter their moves and as far as possible stick with your sugar stocks in hand if not add more.

You will more clarity after results for QI are announced, Dalmia Sugar has already posted satisfactory results.

Krishna Khandelwal

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