Sakthi Sugars gets outperformer rating: Prabhudas Lilladher

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Sakthi Sugars gets outperformer rating: Prabhudas Lilladher

Broking house, Prabhudas Lilladher is bullish on Sakthi Sugars. It has recommended an ‘outperformer’ rating on the company with a target price of Rs 200.

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Broking house, Prabhudas Lilladher is bullish on Sakthi Sugars . It has recommended an 'outperformer' rating on the company with a target price of Rs 200.

The Prabhudas Lilladher report on Sakthi Sugars:

Q2 FY06 result update - On course

"Sakthi Sugars continues to report impressive figures. For Q2 FY06, revenues, at Rs 1.9 billion (up 61.6% yoy), were slightly lower than the Rs 2.1 billion we expected, with a manifold rise in profits, to Rs 203 million (in line with our estimates). We approximated higher revenues and lower margins; the company reported slightly lower revenues and higher margins. Margins for the quarter stood at 21.9% (13.5% a year ago), a 650 basis points jump over the last quarter, led by better realisations in sugar and greater sugar production from cane than in the earlier quarter when production of sugar was more dependent on imported raw sugar."

"The company reported higher interest cost (about Rs 190 million) than a year ago (Rs 100 million). This higher interest cost remains a concern."

"During the quarter, the company sold about 763,800 quintals of sugar, a robust 63.7% yoy growth, along with a 10.2% yoy increase in realisations, to Rs 1,653 a quintal. For H1 FY06, it reported a strong 85.6% volume growth to 1,566,900 quintal and a 12.7% rise in the per quintal realization to Rs 1,643. Revenues for H1 FY06 stood at about Rs 3.8 billion, a healthy 75.5% jump over the same period last year; profit was around Rs 292 million. Margins stood improved by 930 basis point, to 18.7% for the same period."

"With the further firming up of sugar prices both in the home market and globally, more sugar produced due to the greater availability of cane, margin expansion due to the shift from production from raw sugar to sugar production from cane, and with additional capacities coming on stream by end-March 2006, we expect H2 FY06 to continue the trend of healthy figures. For FY06, we estimate revenues at about Rs 8.3 billion, a 34.1% rise over FY05, with profit of about Rs 892 million (Rs 278 million last year)."

Valuation

"The stock trades at 5.9x and 5.1x FY06 and FY07 estimates, respectively, and 6.2x and 5.4x FY06 and FY07 estimated EV/EBIDTA. We re-iterate our Outperformer rating, with a target price of Rs 200."