Six sugar stocks gain 30-150% in 3 months. Experts see industry riding high on ethanol The Sensex and the Nifty ended higher on March 29 but several sugar stocks saw selling pressure. The sector, however, has had a good run so far this calendar year with six stocks gaining more than 30 percent in 2022 and scrips like Ugar Sugar Works turning multi-baggers
March 30, 2022 / 08:45 AM IST
India’s equity benchmarks the Sensex and the Nifty ended higher on March 29 but several sugar stocks saw selling pressure. The sector, however, has had a good run so far this calendar year. Six stocks have gained more than 30 percent in 2022 and scrips like Ugar Sugar Works have turned multi-baggers. We considered only stocks with a market cap of over Rs 500 crore. Experts say the government's emphasis on ethanol blending in fuel has been the main driver of gains in sugar stocks.
Ugar Sugar Works Ltd | The stock has risen 151 from Rs 30.10 on December 31, 2021 to Rs 75.60 on March 29, 2022.
Dhampur Sugar Mills Ltd | The stock has risen 73 from Rs 307.05 on December 31, 2021 to Rs 532.70 on March 29, 2022.
Dwarikesh Sugar Industries Ltd | The stock has risen Rs 70 from Rs 71.40 on December 31, 2021 to Rs 121.20 on March 29, 2022.
Mawana Sugars Ltd | The stock has gained Rs 67 from Rs 78.95 on December 31, 2021 to Rs 131.75 on March 29, 2022.
Triveni Engineering & Industries Ltd | The stock has surged Rs 41 from Rs 221.20 on December 31, 2021 to Rs 312.20 on March 29, 2022.
Vikram Kasat, Head Advisory at Prabhudas Lilladher | "India is a sugar surplus country and Ethanol announcement was one of the key reasons behind the rally along with the huge export demand. Everybody announced their capex as well. And since this Russia-Ukraine war has started, sugar stocks have got a boost as India has become a preferred source for sugar supplies for consuming markets like West Asia, Eastern Africa and South Asia. With rising crude prices, Brazilian sugarcane is being diverted to ethanol, improving opportunities for Indian sugar export. Also due to rising freight volatility in the market, they see India as a better option since Indian cargoes can reach Gulf within a short span of time between one week to 10 days."
"Sugar industries growth was led by a pickup in industrial demand and increased exports. The government's increased emphasis on ethanol blending in fuel has been the main driver of sugar inventories. Sugar businesses produce ethanol as a byproduct, and India wants to blend 20 percent ethanol into petrol and diesel by 2025, implying a greater upside for such stocks. The demand in consumption is yet to increase in the domestic market and we expect that increase in demand will further strengthen the growth of the sector and will lead to further growth. Investors can further Buy/add there positions in these stocks at small correction in the market."
Likhita Chepa, Senior Research Analyst at CapitalVia Global Research | The main driver of sugar stocks has been the government's increased thrust on ethanol blending in fuel. Ethanol is a by-product for sugar companies and India has plans to blend 20% ethanol in petrol and diesel by 2025, from the current level of 8 percent. This is aimed at reducing crude oil imports in India which currently stands at 85 percent. Ethanol demand should grow at a 15 percent CAGR over FY22-30 driven by the government’s mandate of 20 percent ethanol-blending in petrol. It is estimated that by 2025, at 20 percent blending rate, ethanol Industry will grow by 500 percent, with Ethanol demand expected to increase to 1,016 Crore liters. Further, higher diversion of cane towards ethanol will solve the problem of surplus sugar inventory and reduce business volatility.
Mitul Shah, Head of Research at Reliance Securities | "