Balrampur Chini reported a strong set of numbers with 50.5% revenue growth led by 41.7% growth in sugar segment & 96.2% growth in distillery segment. The higher sugar sales were led by higher domestic monthly sales quota whereas distillery segment witnessed robust growth mainly on account of higher volumes led by commissioning of 160 KLD distillery in January 2020. The company sold 3.07 lakh tonnes (lt) of sugar & 5.6 crore litre of ethanol/ENA during the quarter. Operating profit was down 17.3% mainly due to higher off-season spends & low sugar inventory (the company liquidated large part of inventory in H1FY21). The sugar profitability is low in September quarter due to low power sales, higher off-season spends & sugar inventory positioning. In contrast, profitability is disproportionately high in March quarter. PAT declined 21.5% to Rs 78.3 crore.
OutlookBCML is most efficient sugar company with sustainable earnings & strong cash flow generation. It has been giving ~40% payout through dividends and buybacks. With the significant increase in cash flow generation, we expect payout to increase to 60% in FY22E, which would be more than~10% payout yield at current price. We value the stock at 1.6x FY21E P/BV with a revised target price of Rs 210/share. We maintain our BUY rating.
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