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Sugar
ƒ Sugar prices remain at ~| 28-29/kg, sugarcane cost likely to go up
We have seen domestic sugar prices remaining in a range of | 28-29/kg.
However, higher export realisations at ~ | 32-34/kg would help millers
as the government has also allowed 0.5 million tonnes (MT) of exports.
Simultaneously, global prices have also remained above 26 cents/lb. We
believe higher realisations for Renuka do Brasil and VDI would result in
higher earnings for Renuka Sugars. We expect sugarcane prices to
witness a significant increase for Uttar Pradesh (UP) millers due to
elections in UP in June 2012.
ƒ By-product realisations to help curb sugar losses
Sugar production at 24.2 MT in SY11 and high availability of sugarcane
has increased by-product volumes. Ethanol prices are at | 27/litre and
power tariffs at ~| 4 per unit. We believe strong earnings from byproducts could help millers to curb losses from sugar.
ƒ Total 2.7 lakh tonnes of exports allowed in 2011 sugar season
The government has allowed 2.7 lakh tonnes of sugar exports in
trenches, out of which 1.2 MT were under advance general licence
(AGL) and 1.5 MT under open general licence (OGL). High exports
realisations have helped millers to offset their losses due to subdued
domestic realisations. We believe the government would further allow
1.5-2.0 MT of exports in new season as sugar production is likely to
remain high at ~26 MT
: Company Specific View (Q2FY12E)
Company Remarks
Balrampur Chini We expect sugar sales volumes to be at 1.6 lakh tones with sugar realisations at |
29.5 per kg. Moreover, power volumes will increase from 14.7 crore units in Q1FY12
to 20.4 crore units in Q2FY12 at an average tariff of | 4.5 per unit. Export allowance of
0.5 MT would improve the margins
Bajaj Hindustan The company expects sales of 3.3 lakh tonnes of sugar with the average price of |
29.0 per kg. In the power segment, we expect it to record sales of 8.3 crore units with
average tariff of | 4 per unit. However, we expect the interest cost to remain high at
~| 145 crore, which remains a drag for the company
Dhampur Sugar We expect the company to sell 0.9 lakh tonnes of sugar with average realisations of |
29.5 per kg. The company would be selling 9.7 crore units with average tariffs of |
4.6 per unit. We believe sugarcane prices in the new season could witness a
significant increase due to elections in the state in June 2012
Shree Renuka
Sugars
The company is expected to sell 2.6 lakh tonnes at an average realisation of | 29/kg
in India and 2.1 lakh tonnes in Brazil with average realisations of 26 cents/lb. In the
distillery and power segment, the company is likely to fetch better realisations at | 27
per litre and | 4.6 per unit
Source: Company, ICICIdirect.com Research
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