Dhampur Sugar - Q2FY21 First Cut - ICICI Direct

(CMP - Rs. 140, MCap - Rs. 940 crore)

Dhampur Sugar reported strong set of results with 34.3% revenue growth. The working capital debt came down from Rs. 1200.8 crore to Rs. 399.7 crore.

Q2FY21 Earnings Summary

- Consolidated revenue witnessed a growth of 34.3% to Rs. 931.3 crore with sugar business saw a growth of 48.7% & distillery segment growing at 43.6%. We believe the company would have sold 2.17 lakh tonnes of sugar during the quarter as per domestic monthly sale quota. Given, the company was exhausted with the exports by June quarter, it would not have exported any quantities in Q2. The splendid growth in distillery segment would have been driven by increase in ethanol prices last year & higher proportion of B heavy ethanol.

- Operating profit was up from Rs. 33.8 crore to Rs. 72.1 crore backed of higher proportion of B heave ethanol in sales. Led by strong operating profit, net profit was up from Rs. 3.5 crore to Rs. 27.8 crore

- On the balance sheet front, total debt reduced by ~Rs. 870 crore given the company aggressive exported sugar in 2019-20 sugar season & it also sacrificed sugar for ethanol production in last crushing season. The company generated operating cash flow of ~Rs. 930 crore (Rs. 350 crore in corresponding quarter) in last six months

We believe sugar inventory with Dhampur Sugar would be closer to 2.1 lakh tonnes as of September 2020, which would be exhausted by December 2020. With the higher diversion of sugarcane towards ethanol, aggressive exports and higher domestic sales quota, the company has been able to de-leverage its balance sheet. The company has most optimum distillery capacity (400 KLD) in industry & it has the capacity of diverting its entire sugarcane towards B heavy ethanol. We believe the company would increase its distillery volumes in FY21 by maximising Proportion of B heavy ethanol. Moreover the company may not require to export sugar in 2020-21 sugar season If export subsidy is not announced. We remain positive on the stock.

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

Shares of DHAMPUR SUGAR MILLS LTD. was last trading in BSE at Rs.141.7 as compared to the previous close of Rs. 139.5. The total number of shares traded during the day was 18680 in over 674 trades.

The stock hit an intraday high of Rs. 142.75 and intraday low of 137. The net turnover during the day was Rs. 2637183.

Source : Equity Bulls

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