Buy Balrampur Chini Mills; target of Rs 237: Dolat Capital Market

Dolat Capital Market's research report on Balrampur Chini Mills

Balrampur Chini Mills Limited reported a weak quarter, lower than our estimates on all fronts. Sales de-growth of 10.3% YoY to Rs 10.7bn was a function of lower ethanol off-take coupled with weakness in Sugar prices and demand. EBITDA collapsed by 67.0% YoY to Rs 364mn, owing to lower recovery from sugarcane (due to erratic weather conditions), higher fixed overheads being debited in the production quarter (as per the accounting policies) coupled with an inventory write down of ~Rs 570 mn (which is expected to reverse in Q4FY21).

Outlook

We keep our estimates unchanged anticipating a strong recovery in 4QFY21 (with reversal of ~Rs 570mn, higher sales of ethanol and reversion of domestic sugar prices). We continue to maintain our buy rating on Balrampur Chini and value the company on a SOTP basis at a target price of Rs 237/share (implied P/BV of 1.2x on FY23E).

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