Sector Update - Sugar - ICICI Direct

The sugar sector has come out of the bitter cyclicality it used to witness before 2018. In the last four years several government decisions have improved the fundamentals of the sugar sector. On the one hand, floor price of sugar & monthly quota mechanism helped sugar millers to sell sugar above the cost of production while on the other hand sugar exports & sugarcane diversion towards ethanol led to the reduction in sugar inventories. Moreover, increasing proportion of B-heavy & sugarcane juice ethanol would result in significant improvement in margins for sugar millers. Despite record sugar production of 36 million tonne (MT) in 2021-22 sugar season, sugar inventories are going to be at a four-year low of 6.4 MT by the end of September 2022 mainly on account of record exports of 10 MT during the season. This has kept sugar prices firm at ~Rs. 35/kg. Moreover, increasing distillery capacities would result in more diversion towards ethanol, which, in turn, would improve margins of sugar millers and also help in keeping sugar prices firm above the cost of production. It would also help in achieving 20% ethanol blending with petrol by 2025.

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

Source : Equity Bulls

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Sugar SectorUpdate ICICIDirect