Accumulate Balrampur Chini: Way2Wealth

Way2Wealth is bullish on Balrampur Chini Mills (BMCL) and has recommended accumulate rating on the stock in its 12 December, 2012 research report.

“BCML is holding sugar inventory of 2.26lakh t at the cost of Rs31260/t we expect partial impact of new cane price to be felt in Q3FY13 and full impact to be seen in Q4FY13. We expect new cane price will increase COP by around Rs400/qtl. UP Government has announced SAP for sugarcane at Rs290 for early variety, Rs280 for normal variety and Rs275 for rejected variety. Last year UP sugarcane SAP was Rs250, Rs240 and Rs235 respectively. We expect landed cane price for UP sugar mills to be around Rs290/qtl for the season. The announced price is more than our expectations as we worked out our estimates considering Rs265/qtl cane price.” 
“Sugar prices have been weak during the quarter going down from Rs3650/qtl in September 2012 to 3400/qtl currently. Current realization of the firm is around Rs3400/qtl. We expect sugar price to strengthen in H2FY13e due to high cost of cane and reduced production level. Based on above expectations we revise our estimates for BCML downwards. We expect BCML’s EBIT to go down to Rs374cr from earlier estimates of Rs444cr. We revise our FY13e PAT estimates to Rs182cr from Rs 213cr.”
BCML has seen sharp correction in today’s trading session based on the news. At the current price stock is trading at 7.4xFY13e earnings. We feel the negative impact due to cane price increase is into the price of the stock and further downside is limited. We maintain accumulate,” says Way2Wealth research report. FIIs holding more than 30% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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

Read More