Mehta Equities view on Shree Renuka Sugars

36724 Investors following Shree Renuka. Share this News with them.

0

Like this story, share it with millions of investors on M3

Mehta Equities view on Shree Renuka Sugars

Mehta Equities has come out with its report on Shree Renuka Sugars.

Post your opinion here

 

0

Tweet

Share on Tumblr

Shree Renuka BSE | NSE 29/05/12 Are Mutual Funds betting on Shree Renuka?

Mehta Equities has come out with its report on Shree Renuka Sugars .

Shree Renuka Sugar, the second largest sugar manufacturer reported dismal results for the quarter ending 31st March 2011.

Performance below expectations: Shree Renuka Sugars results were below expectations due to higher interest & depreciation cost for Brazilian assets. Profit after tax plunged 74% to Rs 59.4 Cr for the quarter ended March 2011 as against Rs 224.2 Cr in a year ago period. Net profit declined as sugar margins in India remain muted and high interest and depreciation cost in Renuka do Brazil pulled down the consolidated earnings for the company. Net sales witnessed a very marginal growth of 3% from Rs 1781 Cr to Rs 1840 Cr mainly on the back of lower sales from VDI and Renuka-do- Brazil (Brazilian Subsidiaries) as crushing season there starts from March 2011. EBITDA margins were stable at 15.1% on the back of stable sugar realizations in India and Brazil.

Higher interest and depreciation cost for Brazilian assets: Depreciation was up 3.7 times to Rs 111.6 crore from Rs 23.9 crore and interest costs surged 6.2 times at Rs 186.2 crore versus Rs 26 crore on year-on-year basis which weighted heavily to under-perform for this quarter.

Going forward Brazilian operations to drive profitability: Renuka is the only company with a sugar mill in India and Brazil. The company currently has 60% of its c rushing capacity in Brazil and 40% in India. Hence we believe Renuka is best placed over next two years to reap benefits from the robust prices of sugar and ethanol. The company is likely to see strong earnings growth in 2nd half of 2011 as the Brazilian crunching season starts fro mid March 2011.

View: We expect the domestic sugar prices to firm up to Rs 30/kg led by the lower than expected sugar production in India and at the same time, profitability from the Brazilian operations would improve gradually as crushing season starts from Mid March -April 2011. Hence we expect better earnings for the Q3 results and remain positive on the stock for short term. Karnataka is the best sugar performance state when compared with other milling states in terms of the higher recovery; So Renuka has the edge for better performance going forward.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management.Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment