Feb 07, 2012, 01.23 PM | Source: Moneycontrol.com
Aditya Birla Money is bullish on Balrampur Chini Mills (BCML) and has recommended buy rating on the stock with a target of Rs 63 in its February 3, 2012 research report.
, Aditya Birla Money |
“Balrampur Chini Mills Ltd (BCML), net sales for 3QFY12 increased by 24.8% YoY to Rs 6620.8 mn led by 24.7%, 73.1% and 15.6% YoY growth in sales of Sugar, Distillery and Cogen division to Rs 6144.6 mn, Rs 236.0 mn and Rs 828.6 mn respectively. The growth in sugar division was due to increase in cane crushing by 38.9% to 2.8 mn tonnes (on the back of early start of crushing season) leading to increase in sales volume by 31.5% YoY to 0.2 mn tonnes. Free sale sugar realisation was at Rs 29.7/Kg (up 3.5% YoY). Increased sugar crushing lead to increase in sales volume of distillery and cogen division which was further aided by better realisations.”
“In 3QFY12, BCML has posted EBITDA loss of Rs 129.6 mn as compared to profit of Rs 714.1 mn in 5QFY11. Barring one time expense of Rs 920 mn, EBITDA would have been Rs 790.4 mn, implying EBITDA margin of 11.9%. The average cane cost for 3QFY12 was Rs 2520/tonne, which we believe will be same for 4QFY12 too. Interest cost increased by 48.4% YoY to Rs 257.7 mn due to higher working capital requirement and higher interest cost scenario. Overall, in 3QFY12, BCML posted loss of Rs 640.1 mn as compared to the profit of Rs 233.7 mn in the corresponding year ago qtr. Excluding one time expense of Rs 920 mn, PAT would have been 279.9 mn, indicating that company is running the business profitably. UP Sugar Mills Association has filed a writ petition against the SAP of Rs 240/qtl and it is expected some interim lower cane price will be announced for immediate payment to farmers. We have assumed cane price of Rs 2520/tonne for SY12.”
“At current SAP of Rs 2400/tonne, majority of the sugar millers are making loss to the tune of ~Rs 2/Kg, leading to delay in payments to farmers and has led to building up of cane payment arrears. Historically, increase in cane payment arrears has deterred farmers from sowing sugarcane for next season, which usually leads to shortfall in sugar supply and hence sugar prices starts rising. We believe first signs of upturn in sugar cycle are visible, however will wait for more clarity to emerge before including higher sugar price in our model. We have assumed blended sugar realisation of Rs 27.9/Kg and Rs 31.0/Kg for FY12E and FY13E respectively. We expect BCML to crush 8.0 mn tonnes and 7.4 mn tonnes of cane in FY12E and FY13E respectively.”
“We believe the sugar downcycle is near its end and is likely to lead to favorable demand supply scenario in SY13. This may lead to gradual increase in sugar prices from 2HSY12E. Moreover, BCML is well placed to encash any opportunity due to deregulation and healthier balance sheet. At CMP, the stock is trading at EV/EBITDA of 4.0x FY13E EBITDA and P/E of 9.5x FY13E earnings. We reiterate our BUY rating on the stock with price target of Rs 63 (based on average of target FY13E EV/EBITDA of 5.0x and FY13E P/BV of 1.2x),” says Aditya Birla Money research report.
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