Buy Balrampur Chini Mills; target of Rs 495: Sharekhan

Sharekhan's research report on Balrampur Chini Mills

The likely fall in India’s sugar production in the next season and lower global output resulted in a surge in sugar prices (domestic prices up by 8% y-o-y and 11% vs. April 2023 prices), which would help BCML to achieve higher realisation in the coming quarters. With the expansion in crushing capacity and debottlenecking, sugar crushing is expected to increase by ~10% in SS 2023-2024. Expanded ethanol capacity will lead to 31-32 crore litre production and 28-29 crore litre sales for FY2024. Focus on improving recovery through a change in sugar variety and a higher mix of ethanol will result in working capital savings going ahead.

Outlook

We reiterate our Buy rating on Balrampur Chini Mills Limited (BCML) with a revised PT of Rs. 495. The stock trades at 17x/14x its FY2024E/25E earnings. Rising sugar prices and increasing mix of ethanol provide good and consistent earnings visibility in the near term.