Sector Update - Sugar - ICICI Direct

In our March 2021 Sector Report, we had reiterated our positive stance on sugar sector along with an imminent re-rating. It is important to note that sugar stocks have seen 2-4x run-up in four months while valuation multiples have been re-rated from 3-5x to 8-10x PE. The sector has seen a turnaround from being a cyclical to a structural growth sector backed by government's aggressive ethanol blending programme. In the current ethanol procurement cycle, OMCs would be procuring more than 300 crore litre of ethanol vs. 180 crore litre last year, which is closer to ~8% blending levels. We believe more than 15% blending levels would help the sugar industry to divert 6 million tonnes (MT) of excess sugar produced every year. With aggressive distillery capacity addition in India, our coverage sugar companies would see strong earnings growth over the next three years.

For details, click on the link below: Link to the report

Source : Equity Bulls

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