Balrampur Chini - Q4FY20 First Cut - ICICI Securities

(CMP: Rs. 134; MCap: Rs. 2892 crore)

Balrampur Chini posted strong Q4FY20 results with 31.1% revenue growth led by aggressive exports in the current season.

Q4FY20 Earnings Summary

- The healthy revenue growth was led by 40% increase in sugar sales on the back of aggressive exports & higher domestic sugar sale quota. The distillery sales witnessed a growth of 53.2% on account of commissioning of new 160 KLD distillery in January 2020. However, co-generation sales dipped by 22.9% mainly due to reduced power tariff UPERC in July 2019

- Export revenue during the quarter was Rs. 368 crore. We believe the company would have sold 4.3 lakh tonnes of sugar during the quarter given 2.93 lakh tonnes of domestic sales quota & 2.3 lakh tonnes of original export quota (a large part of it would have been sold in March quarter). Operating profit declined by 6.6% largely impacted by decline in power revenues. Net profit declined by 14.8% impacted by lower taxation in base quarter

- The company generated Rs. 850 crore of cash flow from operations in FY20. Working capital debt reduced by Rs. 335 crore despite similar inventory levels. The company has announced a buyback of 1 crore shares at the price of Rs. 180/share

Sugar industry has seen stable earnings with the MSP (Minimal Selling price) in place. Moreover, the industry has been able to liquidate huge sugar inventories through export incentives & diversion towards B heavy ethanol. We believe Balrampur Chini is best placed in the sector given lower requirement of working capital debt, optimum distillery & power capacities to utilize all its molasses & bagasses. The company generated Rs. 850 crore of operating cash flows during in FY20. We believe continuance of export incentives & expected hike in MSP would further improve the earnings & cash flow for the company. The covid19 impact on sugar industry is minimal with ~1 million tonnes of lower consumption. We remain positive on the stock.

We would be coming out with an update after the conference call.

Shares of BALRAMPUR CHINI MILLS LTD. was last trading in BSE at Rs.130 as compared to the previous close of Rs. 134.7. The total number of shares traded during the day was 275320 in over 5697 trades.

The stock hit an intraday high of Rs. 141.7 and intraday low of 129.1. The net turnover during the day was Rs. 37202749.

Source : Equity Bulls

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