Buy Balrampur Chini Mills; target Rs 64: ABMoney
Aditya Birla Money is bullish on Balrampur Chini Mills and has recommended buy rating on the stock with a target price of Rs 64 in its August 07, 2013 research report.
August 07, 2013 / 18:29 IST
Aditya Birla Money's report on Balrampur Chini Mills
"Balrampur Chini Mills, net sales for 1QFY14 decreased by 1.5 percent YoY to Rs 6816.2 mn mainly led by 0.5 percent YoY decline in sales of Sugar division to Rs 5787.4 mn. The de-growth in sugar division was due to decrease in sales volume by 10.7 percent YoY to 0.17 mn tonnes coupled with 3.4 percent YoY decline in free sale sugar realisation to Rs 31.9/Kg. The performance of distillery division was also muted with sales growth of 5.5 percent YoY to Rs 563.3 mn, led by 5.7 percent YoY decrease in sales volume at 18871 KL, offset by increase in blended realisation by 11.8 percent YoY to Rs 29.6/litre. Cogen division revenue grew by healthy 17.6 percent YoY to Rs 939.3 mn, mainly led by 12.1 percentYoY growth in sales volume to 194.4 mn units and 1.9 percent YoY increase in per unit realisation to Rs 4.3.""EBITDA for 1QFY14 decreased by 14.4 percent YoY Rs 489.4 mn and EBITDA margin declined by 110 bps to 7.2 percent. The decline in margin is mainly due to EBIT loss in sugar division to the tune of Rs 412.6 mn, led by inventory write down on carryover inventory and sugar produced during 1QFY14 to Rs 31.2/Kg. The muted performance of sugar division was partially offset by healthy performance of Distillery (EBIT up 18.7 percent YoY, EBIT margin up 540 bps to 48.3 percent) and Cogen division (EBIT up 26.5 percent YoY, EBIT margin up 420 bps to 60.0 percent). Other income increased by 39.5 percent YoY to Rs 79.1 mn, led by write-back of Rs 55 mn on account of cane purchase tax. Overall, in 1QFY14, the company posted PAT loss of Rs 97.7 mn as compared to loss of Rs 180.5 mn in 1QFY13.""Ethanol buying program of OMC’s: UP based mills are supposed to supply 0.21 bn litre of ethanol at Rs 34-35/litre. BCML is expected to supply ~26.8 mn litre of ethanol at Rs 35/litre and the quantity has to be supplied during Jul13-Mar14 period. Now with ethanol being supplied at Rs 35/litre, we expect prices of RS and ENA to move up.""Outlook on domestic sugar industry: Pan India sugar production for SY13 is likely to be ~24.8 mn tonnes as compare to that of 26.3 mn tonnes in SY12. Due to drought in Maharastra and Karnataka last year, in SY14E, sugarcane production is likely to fall by 8-10 percent in Maharashtra and Karnataka and this will further impact sugar production. Preliminary estimates indicated production of 23.7 mn tonnes in SY14E. We believe sugar demand-supply scenario is fairly balanced and domestic sugar prices are likely to remain stable in the range of Rs 31-33/Kg.""Linking sugar and sugarcane prices: Two key sugar producing states - Maharashtra and Karnataka, are likely to pass legislation of linking sugarcane price to sugar and its byproducts prices, as per Rangarajan formula. We expect the same to get passed in UP also and if done, will be win-win situation for all stakeholders."Valuations: At CMP, the stock is trading at P/BV of 0.6x FY15E BV and EV/EBITDA of 2.1x FY15E EBITDA (adjusted for WC debt). We reiterate our BUY rating on the stock with Aug14 revised price target of Rs 64/share (based FY15E P/BV of 1.0x). We reiterate, our stance that, BCML is the best play in sugar industry with least debt on balance sheet," says Aditya Birla Money research report.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. 
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