Buy Balrampur Chini Mills; target of Rs 420: Sharekhan

Sharekhan's research report on Balrampur Chini Mills

Balrampur Chini Mills Limited’s (BCML’s) Q1FY2023 performance was below par as lower sugar yields, a rise in SAP cost and higher fixed costs affected profitability. With good rains in the cane-growing areas, BCML is expecting better acreage in the next sugar season. It has undertaken various steps to improve cane availability and sugar productivity. As ethanol capacity will be doubled to 1,050 KLPD by Q3FY2023, BCML expects to produce 35 crore litres of ethanol in FY2024. Better mix will help improve overall EBITDA margin. Focus on consistent improvement in sugar and ethanol production will help drive up cash flows and deriving better return ratios.

Outlook

The stock is currently trading at 14.4x/11.5x its FY023E/24E earnings. We maintain Buy with a revised PT of Rs. 420.

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