Here's what to expect from Balrampur Chini Q4 earnings

UP-based Balrampur Chini is likely to post sharp 42% decline in net profit at Rs 75 crore for the January-March quarter (Q4), according to a CNBC-TV18 poll.

It is also expected to post a 3.5 percent drop in EBITDA at 186.5 crore. However, Q4 net sales are expected to rise by 22 percent at Rs 706 crore compared to Rs 578 crore in the same period last year.   
The poll expects the sugar major’s margins at 26.4% versus 33.5% in the comparable quarter last year. Factors to Watch

1. Sugar sales volumes expected to be higher YoY at 1.85 lakh tonnes, on back of sugar division performance
2. Free sale realizations expected to rise to Rs 32.25-32.5/kg
3. High sugarcane costs could be a drag on margins & can lead them to come lower at 26.4%
4. Could see a write-down on sugar inventory to an extent to Rs 100-150/mt
5. Expect lower offtake by OMCs, higher sales to breweries would lead to better realisation from distillery Biz
6. Power revenues would remain healthy

Q4FY12 YoY (P&L not clear)

• Net Sales at Rs 578 Cr
• EBITDA at Rs 193 Cr
• Margins at 33.5%
• Net Profit at Rs 130 Cr

Q3FY13 YoY

• Net Sales up 43.5% at Rs 950 Cr vs Rs 662 Cr
• EBITDA Gains at Rs 118 Cr vs EBITDA Loss at Rs 10 Cr
• Margins at 12.4%
• Net Profit at Rs 60 Cr vs Net Loss at Rs 64 Cr
• Finance Cost at Rs 21.5 Cr vs Rs 29 Cr
• Tax Expense at Rs 15 Cr

Segmental Revenue
Sugar Biz up 50% at Rs 921 Cr vs Rs 612 Cr
Co Generation Biz down 18% at Rs 68 Cr vs Rs 83 Cr
Distillery Biz down 46% at Rs 13 Cr vs Rs 24 Cr Segmental Profits
Sugar Biz Profit at Rs 63 Cr vs Loss at Rs 82 Cr
Co Generation Biz down 29% at Rs 32 Cr vs Rs 45 Cr
Distillery Biz down 29at Rs 5 Cr vs Rs 7 Cr
 
 The key takeaways for Q3FY13 are as given below:-

• Superlative performance from sugar segment
• 18.9% decline in crushing volumes
• Sequential decline in interest expenses
• Domestic production outlook – Bleak
• Recovery in Brazil resulting in stable production globally
•  5% ethanol blending program

  ICICI Securities on the Sector Decline in production to keep prices firm
With the crushing season almost over through out the country, sugar production for the year (SY13) was reported to be lower by ~2% at 23.1 million tonnes (MT). The drop in production was due to the lower output in the Maharashtra (4% less at 7.7 MT) and Karnataka (7% less at 3.3 MT) due to the drought like condition in the two states. Production in Uttar Pradesh was higher at 6.8 MT against 6.7 MT last year. According to Indian Sugar Marketing Association (ISMA), the estimated production for SY13 is 24.6 MT against 26.3 MT in SY12. The decline in production during the year and demand growing at 2-3% per annum has aided in pulling prices up by ~| 4/kg YoY. Further, with the prevailing drought like conditions in Maharashtra (largest producer) it is expected that sugarcane production would further decline in SY14, keeping sugar prices firm, going ahead. Decontrol finally here, earnings to witness a jump in FY14E!
The much awaited decision on partial decontrol of sugar sector is finally taken by the govt. The key implementations that would be brought into effect for sugar production post SY12 are removal of regulated release quota mechanism and removal of levy quota sales by millers to the government at a subsidized rate of |19.5/kg. We believe that the removal of free sale mechanism would increase the quantity sold in the market during peak season aiding in higher revenues and removal of levy quota would reduce the sugar industry a burden of ~|3000 crore. We recommend investors to prefer stocks that have a lighter balance sheet. Hence, Balrampur Chini and Dhampur Sugar remain our preferred picks.