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Sugar
Volumes to improve QoQ but remain stagnant YoY
Sugar millers with domestic operations would witness a QoQ
increase in sales volumes on the back of higher domestic
production. However, YoY it would remain stagnant. Sugar
realisation is likely to improve compared to Q1SY11 as domestic
sugar production will touch 24.5 million tonnes (MT) below the
earlier estimate of 25.5 MT. However, Shree Renuka Sugars would
witness a decline in sugar volumes due to very low inventories in
Brazil. We believe sugar prices will firm up after the crushing is over
in India and the new sugar season starts in Brazil.
Gross margins increase
With sugar prices at ~| 28-29 per kg and implicit sugarcane cost at
~| 22 per kg, gross margins for millers have increased to | 6-7 per
kg. Simultaneously, higher realisations from ethanol at | 27 per kg
and power at | 4 per unit would add to the profitability. Improved
realisations and controlled cost would result in better margins for
the company.
Export of 1.5 MT allowed
The government has allowed Indian mills to export 1.0 MT of sugar
before March 2011 under the advance license scheme (ALS) and
also notified 0.5 MT of exports under open general licence (OGL).
We believe that after the 1.5 million tonnes of exports, inventory
levels would remain at ~3.5 MT at the end of the season. This is
less than two months of consumption. This would result in higher
sugar realisations for millers from exports as global prices are still a
tad higher than domestic prices.
Estimates for Q4FY11E: (Sugar) (| Crore)
Company Remarks
Balrampur
Chini
The company will sell 2.0 lakh tonnes of sugar at an average realisation of | 29.5 per
kg. With the higher realisations of ethanol and power at | 26 per litre and | 4 per unit,
respectively, and implicit lower sugarcane cost at | 21 per kg, earnings will improve
compared to Q5FY11
Dhampur
Sugar
We expect the company to sell 1.3 lakh tonnes of sugar at average realisation of | 28
per kg. With the lower sugarcane cost at | 210 per quintal and higher realisations from
power at | 4 per unit, we believe margins for the company will improve substantially
in Q6FY11
Shree
Renuka
Sugars
Shree Renuka Sugars is likely to sell 2.5 lakh tonnes of sugar at an average realisation
of | 28.5 per kg. However, it would witness subdued results for Q2SY11 due to low
inventory levels in Brazil at the beginning of the quarter and higher interest and
depreciation cost for Renuka do Brasil
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� �
Sugar
Volumes to improve QoQ but remain stagnant YoY
Sugar millers with domestic operations would witness a QoQ
increase in sales volumes on the back of higher domestic
production. However, YoY it would remain stagnant. Sugar
realisation is likely to improve compared to Q1SY11 as domestic
sugar production will touch 24.5 million tonnes (MT) below the
earlier estimate of 25.5 MT. However, Shree Renuka Sugars would
witness a decline in sugar volumes due to very low inventories in
Brazil. We believe sugar prices will firm up after the crushing is over
in India and the new sugar season starts in Brazil.
Gross margins increase
With sugar prices at ~| 28-29 per kg and implicit sugarcane cost at
~| 22 per kg, gross margins for millers have increased to | 6-7 per
kg. Simultaneously, higher realisations from ethanol at | 27 per kg
and power at | 4 per unit would add to the profitability. Improved
realisations and controlled cost would result in better margins for
the company.
Export of 1.5 MT allowed
The government has allowed Indian mills to export 1.0 MT of sugar
before March 2011 under the advance license scheme (ALS) and
also notified 0.5 MT of exports under open general licence (OGL).
We believe that after the 1.5 million tonnes of exports, inventory
levels would remain at ~3.5 MT at the end of the season. This is
less than two months of consumption. This would result in higher
sugar realisations for millers from exports as global prices are still a
tad higher than domestic prices.
Estimates for Q4FY11E: (Sugar) (| Crore)
Company Remarks
Balrampur
Chini
The company will sell 2.0 lakh tonnes of sugar at an average realisation of | 29.5 per
kg. With the higher realisations of ethanol and power at | 26 per litre and | 4 per unit,
respectively, and implicit lower sugarcane cost at | 21 per kg, earnings will improve
compared to Q5FY11
Dhampur
Sugar
We expect the company to sell 1.3 lakh tonnes of sugar at average realisation of | 28
per kg. With the lower sugarcane cost at | 210 per quintal and higher realisations from
power at | 4 per unit, we believe margins for the company will improve substantially
in Q6FY11
Shree
Renuka
Sugars
Shree Renuka Sugars is likely to sell 2.5 lakh tonnes of sugar at an average realisation
of | 28.5 per kg. However, it would witness subdued results for Q2SY11 due to low
inventory levels in Brazil at the beginning of the quarter and higher interest and
depreciation cost for Renuka do Brasil
Source: Company, ICICIdirect.com Research
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