Balrampur Chini - Q2FY21 First Cut - ICICI Securities

(CMP - Rs. 150, MCap - Rs. 3171 crore)

Balrampur Chini reported Q2FY21 results with 50.5% revenue growth & 21.5% earnings decline.

Q2FY21 Earnings Summary

- Consolidated revenue witnessed a growth of 50.5% to Rs. 1289.9 crore with sugar business saw a growth of 41.7% & distillery segment growing at 96.2%. Sugar sales growth was led by higher domestic sales quota. The company sold 3.07 lakh tonne of sugar at a realisation of Rs. 32.97/kg. Distillery segment growth was led by 83.8% higher volumes & 6.7% realisation growth. The higher volume was mainly on account of commissioning of 160 KLD distillery in January 2020. Power sales was grew by 23.2% to Rs. 30.8 crore. The company sold 1.32 crore units as against 2.04 crore units in corresponding quarter. With the reduction in power tariffs, the company prefers to sell bagasse instead of generating power in off-season

- Operating profit was down by 17.3% mainly due to higher off-season spends & low sugar inventory (the company liquidated large part of inventory in H1FY21). The sugar profitability is low in September quarter due to low power sales, higher off-season spends & sugar inventory positioning. Whereas profitability is disproportionately high in March quarter. Net profit declined by 21.5% to Rs. 78.3 crore

- On the balance sheet front, total debt reduced by ~Rs. 1100 crore (with higher exports sales the company repaid its entire working capital debt). Long term debt stands at Rs. 400 crore with cost of debt at less than 5%. The company announced capacity addition for new distillery of 320 KLD with the capex of Rs. 320 crore. The new distillery will be utilised for producing ethanol from sugarcane juice & grain. The company would take Rs. 220 crore debt for this capex

Within Sugar industry, Balrampur Chini is one of the most efficient companies with light balance sheet & optimum integration. We believe the announcement of new capacity addition in distillery would permanently solve the problem of excess sugar inventory for the company. The company would be able to sacrifice total 2.0 lakh tonnes of sugar after the current capacity addition. This would eliminate the dependence on exports. We believe the company would be able to generate ~Rs. 1200 cash flow from operations in FY21. In the current season, the company would be maximising their B heavy ethanol production to keep the sugar inventory low. The company would be exhausted with last year sugar inventory by 15th Dec 2020. These efforts would keep the company's balance sheet lightest in the industry. We remain positive on the stock.

We will be coming out with a detailed update after the conference call with the management.

Shares of BALRAMPUR CHINI MILLS LTD. was last trading in BSE at Rs.149.45 as compared to the previous close of Rs. 151.2. The total number of shares traded during the day was 78735 in over 2010 trades.

The stock hit an intraday high of Rs. 154 and intraday low of 147.95. The net turnover during the day was Rs. 11825775.

Source : Equity Bulls

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