Buy Dhampur Sugar Mills; target of Rs 315: Sharekhan

Sharekhan's research report on Dhampur Sugar Mills

Dhampur Sugar Mills Limited’s (DSML’s) Q1FY2024 numbers were decent with revenues and PAT rising 10% and 16% y-o-y respectively; EBIDTA margins were marginally higher by 45 bps y-o-y due to better mix. Ethanol division revenue grew by 66% y-o-y; margins were down by 164 bps y-o-y to 16.4%. The division is expected to post strong double-digit growth in coming years on back of expanded capacities. With strategies in place such as scaling up of the ethanol business, better productivity of sugar business and falling manufacturing costs, DSML’s revenue and PAT are expected to clock 12% and 21% CAGR, respectively, over FY2023-25E.

Outlook

Stock trades attractively at 9.3x/7.9x its FY2024E/FY2025E earnings, respectively. We maintain a Buy with an unchanged PT of Rs. 315.