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December 2010 quarter preview: Return to profits for most sugar cos; another relatively weak quarter for Jain
● We expect a return to profits for most sugar companies in the
December quarter results, partly due to higher sugar realisations –
up 8-10% QoQ – and due to this being a seasonally strong
quarter in the absence of ‘naked costs’.
● We expect the updates on cane crushing and Shree Renuka’s
Brazilian subsidiaries to be the key takeaways from the postresults
discussions. Indications are for a slightly disappointing
start to the crushing season with cold weather affecting harvesting
in Uttar Pradesh and recovery rates lower in Maharashtra.
● With unseasonal rainfall affecting implementation in October, we
expect another relatively weak quarter for Jain Irrigation with MIS
revenues estimated to grow at 28% YoY against full-year
expectation of 36% YoY. This could lead to downgrades in fullyear
numbers for Jain.
● Our talks with officials from the project states of Andhra Pradesh
and Gujarat indicate the possibility of a downward revision in fullyear
targets. In Andhra Pradesh, the FY11 target is 150,000 Ha,
flat versus FY10, while in Gujarat, it is 80,000 Ha against initial
estimates of 100,000 Ha. However, officials from both states
indicated that the implementation is now back to normal and that
they were confident of meeting the revised targets
We expect a return to profits for most sugar companies in the
December quarter results, partly due to the rise in sugar realisations –
up 8-10% QoQ, and due to December being a seasonally strong
quarter – there are no ‘naked costs’ since it is a producing quarter.
Cane crushing, Renuka’s Brazilian business to be focus
areas
We expect the updates on cane crushing and expectations of full-year
production to be the key focus around results-related discussions.
Indications are for a slightly disappointing start to the crushing season
with cold weather affecting harvesting in Uttar Pradesh and recovery
rates lower in Maharashtra.
For Shree Renuka, the focus would continue to be on its Brazilian
operations. We would be particularly interested in updates on prebooking
of its sugar sales for the 2011/12 season.
Jain Irrigation – another weak quarter may lead to
downgrades in full-year earnings
With unseasonal rainfall affecting implementation in October, we
expect another relatively weak quarter for Jain Irrigation, with MIS
revenues estimated to grow at 28% YoY against full-year expectation
of 36% YoY. Currently, consensus full-year EPS estimate for Jain
Irrigation for FY11 and FY12 are Rs8.3 and Rs11.5, respectively.
Weak earnings could lead to downgrades in full-year estimates.
Project states indicate downward revision in full-year
targets, but pick up in implementation of late
Our conversations with officials from the two project states of Andhra
Pradesh and Gujarat indicate a downward revision in full-year targets.
In case of Andhra Pradesh, the target for FY11 is 150,000 Ha, same
as for FY10 against initial indication of 250,000 Ha. In Gujarat,
implementation issues due to unseasonal rainfall imply that only
80,000 Ha may be achieved versus a target of 100,000 Ha and last
year’s 70,000 Ha. Until November, only 58,000 Ha has been brought
under MIS. However, officials from both states indicated that
implementation is now back to normal and that they were confident of
meeting the revised targets.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� �
December 2010 quarter preview: Return to profits for most sugar cos; another relatively weak quarter for Jain
● We expect a return to profits for most sugar companies in the
December quarter results, partly due to higher sugar realisations –
up 8-10% QoQ – and due to this being a seasonally strong
quarter in the absence of ‘naked costs’.
● We expect the updates on cane crushing and Shree Renuka’s
Brazilian subsidiaries to be the key takeaways from the postresults
discussions. Indications are for a slightly disappointing
start to the crushing season with cold weather affecting harvesting
in Uttar Pradesh and recovery rates lower in Maharashtra.
● With unseasonal rainfall affecting implementation in October, we
expect another relatively weak quarter for Jain Irrigation with MIS
revenues estimated to grow at 28% YoY against full-year
expectation of 36% YoY. This could lead to downgrades in fullyear
numbers for Jain.
● Our talks with officials from the project states of Andhra Pradesh
and Gujarat indicate the possibility of a downward revision in fullyear
targets. In Andhra Pradesh, the FY11 target is 150,000 Ha,
flat versus FY10, while in Gujarat, it is 80,000 Ha against initial
estimates of 100,000 Ha. However, officials from both states
indicated that the implementation is now back to normal and that
they were confident of meeting the revised targets
We expect a return to profits for most sugar companies in the
December quarter results, partly due to the rise in sugar realisations –
up 8-10% QoQ, and due to December being a seasonally strong
quarter – there are no ‘naked costs’ since it is a producing quarter.
Cane crushing, Renuka’s Brazilian business to be focus
areas
We expect the updates on cane crushing and expectations of full-year
production to be the key focus around results-related discussions.
Indications are for a slightly disappointing start to the crushing season
with cold weather affecting harvesting in Uttar Pradesh and recovery
rates lower in Maharashtra.
For Shree Renuka, the focus would continue to be on its Brazilian
operations. We would be particularly interested in updates on prebooking
of its sugar sales for the 2011/12 season.
Jain Irrigation – another weak quarter may lead to
downgrades in full-year earnings
With unseasonal rainfall affecting implementation in October, we
expect another relatively weak quarter for Jain Irrigation, with MIS
revenues estimated to grow at 28% YoY against full-year expectation
of 36% YoY. Currently, consensus full-year EPS estimate for Jain
Irrigation for FY11 and FY12 are Rs8.3 and Rs11.5, respectively.
Weak earnings could lead to downgrades in full-year estimates.
Project states indicate downward revision in full-year
targets, but pick up in implementation of late
Our conversations with officials from the two project states of Andhra
Pradesh and Gujarat indicate a downward revision in full-year targets.
In case of Andhra Pradesh, the target for FY11 is 150,000 Ha, same
as for FY10 against initial indication of 250,000 Ha. In Gujarat,
implementation issues due to unseasonal rainfall imply that only
80,000 Ha may be achieved versus a target of 100,000 Ha and last
year’s 70,000 Ha. Until November, only 58,000 Ha has been brought
under MIS. However, officials from both states indicated that
implementation is now back to normal and that they were confident of
meeting the revised targets.
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