Buy Balrampur Chini; target of Rs 190: ICICI Direct

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26 Aug, 2025 12:21

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ICICI Direct's research report on Balrampur Chini

Balrampur Chini (BCML) reported a strong set of numbers with revenue growth of 50.8% driven by 60% growth in sugar & distillery sales. The growth in sugar sales was led by 62% jump in volumes due to higher domestic sales quota & exports. The robust growth in distillery sales was driven by 39.1% growth in volumes aided by new capacity & 15.9% increase in realisation (due to higher proportion of B heavy ethanol). Power revenues were down 13.5% with significant decline in volumes as company preferred to sell bagasse given significant reduction in power tariff last year. Gross margins fell 547 bps due to higher proportion of early variety sugarcane (priced higher than general variety), sugar sacrifice for B heavy ethanol & 3% decline in sugar realisation mainly due to lower sugar prices in April & May 2020 as sugar demand dipped from bulk buyer during lockdown. Notably early variety sugarcane improves recovery & diversion towards B heavy increases ethanol production, so benefit to these measures would fructify in next two quarters. Operating profit increased 23.9% to Rs 217.9 crore on the back of higher sale. Net profit increased 32.1% to Rs 139.5 crore.

Outlook

BCML is the most efficient sugar company with sustainable earnings & strong cash flows. The company has optimum distillery capacity to divert 65% of its sugarcane to produce B heavy ethanol. This would result in sufficient sacrifice of sugar to keep inventory at comfortable levels (one to two moths) before the season starts. We estimate the company would generate Rs 697 crore & Rs 787 crore operating cash flow in FY21E & FY22E, respectively. We value the stock 1.5x FY21E price to book with a revised target price of Rs 190/share and maintain BUY recommendation.

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