Accumulate Balrampur Chini Mills - Way2Wealth

- UP Government has announced SAP for sugarcane at Rs.290 for early variety, Rs.280 for normal variety and Rs.275 for rejected variety. Last year UP sugarcane SAP was Rs.250, Rs.240 and Rs.235 respectively.

- We expect landed cane price for UP sugar mills to be around Rs.290/qtl for the season. The announced price is more than our expectations as we worked out our estimates considering Rs.265/qtl cane price.

- Herein, we revise our estimates for the year as per new cane price. As BCML is holding sugar inventory of 2.26lakh t at the cost of Rs.31260/t we expect partial impact of new cane price to be felt in Q3FY13 and full impact to be seen in Q4FY13. We expect new cane price will increase COP by around Rs.400/qtl.

- Sugar prices have been weak during the quarter going down from Rs.3650/qtl in September 2012 to 3400/qtl currently. Current realization of the firm is around Rs.3400/qtl. We expect sugar price to strengthen in H2FY13e due to high cost of cane and reduced production level.

- Based on above expectations we revise our estimates for BCML downwards. We expect BCML's EBIT to go down to Rs.374cr from earlier estimates of Rs.444cr. We revise our FY13e PAT estimates to Rs.182cr from Rs. 213cr.

Valuation: BCML has seen sharp correction in today's trading session based on the news. At the current price stock is trading at 7.4xFY13e earnings. We feel the negative impact due to cane price increase is into the price of the stock and further downside is limited. We maintain ACCUMULATE.

Source : Equity Bulls

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