Dwarikesh Sugar - Q2FY21 Result Update - ICICI Direct

Dwarikesh Sugar (DSL) posted a strong set of results with 138.3% revenue growth to Rs. 417.4 crore, mainly on account of higher sugar & ethanol sales. Sugar sales grew 123.4% led by higher domestic sales quota & export. Ethanol sales were up from Rs. 4.3 crore to Rs. 39.6 crore aided by higher ethanol volumes as company commissioned 100 KLD distillery in December 2019. The company sold entire C heavy ethanol during the quarter, which restricted realisation at Rs. 43.8/litre in Q2. We believe DSL would be producing ~80% ethanol from B heavy molasses in sugar season 2020-21, which would significantly improve distillery realisations. Domestic sugar sales quota was 93000 tonnes while export volumes were 19900 tonnes during the quarter. We believe the company is holding 1.76 lakh tonnes (lt) of sugar as of September 2020, which would be exhausted by February 2021. Operating profit increased 148.7% to Rs. 45.5 crore, largely on the back of higher sales. PAT grew from Rs. 4.5 crore to Rs. 17.7 crore.

Valuation & Outlook

DSL is one of the most efficient sugar companies with lowest cost of production given more than 12.2% sugar recovery. The company only has Rs. 218 crore of term loan at a concessional interest rate. With strong possibility and small inventory reduction, DSL would be able to generate Rs. 126 crore and 193 crore of cash from operations in FY21E & FY22E, respectively. We expect ~Rs. 200 crore working capital debt reduction in the next two years. We value the stock at 1.1x FY21 book value with a target price of Rs. 34/share and have a BUY recommendation on the stock.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Dwarikesh_Q2FY21.pdf

Shares of DWARIKESH SUGAR INDUSTRIES LTD. was last trading in BSE at Rs.27.8 as compared to the previous close of Rs. 27.4. The total number of shares traded during the day was 13344 in over 98 trades.

The stock hit an intraday high of Rs. 27.95 and intraday low of 27.55. The net turnover during the day was Rs. 369428.

Source : Equity Bulls

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