Sharekhan's research report on Dhampur Sugar Mills
Dhampur Sugar Mills Ltd (DSML) registered mixed performance in Q1FY2023 with revenues growing by 52.3% y-o-y to Rs. 828.9 crore, while EBITDA margins fell by 292 bps y-o-y to 9.9% and PAT grew by 26.2% y-o-y to Rs. 39.3 crore. Strong revenue growth was driven by outperformance of all divisions (Sugar 58%, ethanol 46%, ethyl acetate 49% and potable spirits 85%). Ethanol segment EBIT margins fell sharply due to higher input prices/transfer pricing dragging overall profitability. Proposed 130 KLPD ethanol expansion (including 100 KLPD of grain) would lead to ethanol production worth 14-15 crore litre in FY2023 and 16 crore litre in FY2024.
Stock trades at 9.6x and 7.3x its FY2023E and FY2024E earnings. We maintain a Buy recommendation on the stock with an unchanged price target of Rs. 295.
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