Buy Balrampur Chini; target of Rs 385: ICICI Direct
ICICI Direct is bullish on Balrampur Chini recommended buy rating on the stock with a target price of Rs 385 in its research report dated Jun 03, 2021.
June 10, 2021 / 12:18 PM IST
ICICI Direct's research report on Balrampur Chini
Balrampur Chini (BCML) reported 37.7% growth in operating profit in Q4FY21 on account of higher distillery volumes & realisation. The absence of sugar exports resulted in 41.4% revenue de-growth with similar decline in sugar segment sales. The company sold 1.9 lakh tonnes (lt) of sugar vs. 4.5 lt in corresponding quarter whereas sugar realisation was flat at Rs 32.1 / kg. In 2020-21 sugar season, the company saw 22% dip in sugar production mainly on account lower sugarcane yield in its catchment area due to red rot disease. Distillery segment sales increased 18.1% with 11.5% increase in volumes, 4.7% higher realisation. The higher proportion of B-heavy ethanol sales aided growth in the segment. BCML holds 6.4 lt of sugar priced at Rs 31.3 / kg as on March 2021. PAT saw de-growth of 2.5% to Rs 235.5 crore due to tax write back in the base quarter. Total debt for the company declined by ~Rs 250 crore whereas it generated operating cash flow of Rs 648.9 crore in FY21 with strong profitability.
BCML is the most efficient sugar company with sustainable earnings and strong cash flow generation. We believe the company would increase shareholder’s payout (buybacks, dividend) to ~60% from current 40% payout. We believe the market recognises the big opportunity in ethanol blending programme and the stock is poised to command better valuation multiples. We value the stock at 10x FY23E earnings with a target price of Rs 385 / share (earlier: Rs 285) and maintain our BUY recommendation.
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