Balrampur Chini Mills": SPA Securities,

Balrampur Chini came out with better than expected set of numbers on the back of robust profitability clocked by sugar
division, which were aided by sharp improvement in volumes, better realisations and liquidation of low cost inventory.
Sugar prices have remained buoyant over the past six months on account of lower production estimate of 23 mt for this
season (26 mt in 2011-12). Revenues from byproduct - ethanol and co-generation segments however remained subdued
due to delayed start in crushing this season and lack of clarity on the ethanol pricing. We change our estimates to factor
in higher sugar cane prices and retain our BUY rating on the stock with a revised target of INR 63.

Technicals- Sterlite Industries, Subex, PSL, Foseco India, Balrampur Chini,Fresenius Kabi Oncology:: Business Line

Balrampur Chini UNDERPERFORM- HDFC Sec

Higher SAP dents profitability
The UP state govt has increased the sugarcane price
for SS13 by Rs 40/quintal to Rs 275-290/qtl for all
varieties. Average cane variety will cost Rs 280/qtl vs
Rs 240/qtl in SS12.
Sugarcane constitutes 85-90% of total operating cost.
Hence, a higher cane price can significantly dent
EBIDTA. FY13 profitability will be less impacted as
2/3rd of the sales will take place from low cost
opening inventory. However, FY14 profit estimates
are revised down by 83% post the SAP hike,
compounded by the likelihood of another hike next
year (2014 is an election year).
This adverse situation can be possibly countered by
an increase in freesale sugar prices (tight demandsupply,
sugar production set to fall 10% in SS13) and
removal of levy quota (as suggested by the
Rangarajan committee).
BRCM benefits from freesale sugar prices. Co is set
for ~8% higher crushing (9.1 mT) in FY13 and has a
strong balance sheet (D/E 0.5 as at Sep-12).
Downgrade to UPF, TP Rs 52 (0.95x FY14E BV, 50%
discount to 6 yr avg P/BV of 1.9).
 UP’s State Advised Price (SAP) for cane in SS13 has
been set at Rs 280/qtl. This is 65% higher than FRP (set
by the centre) of Rs 170/qntl. Sharp increases during
the exit years of the BSP tenure plus this hike have led
to doubling of cane price in UP over the last 4 years.
 India’s sugar production is likely to fall by 10% in SS13
to 23.6 mT due to a sub-par monsoon. There should be
~20% fall in production in Maharashtra & Karnataka
and 10% increase in UP (UP players should benefit).
 Sugar prices are likely to remain strong in FY13 & FY14
due to tight demand-supply scenario & high cane cost.
 We have decreased our PAT estimate for FY13E/ FY14E
by 4/83% due to higher cane cost. However, if levy
quota is abolished, our earnings can rise significantly.
 Downgrade to UPF with a TP of Rs 52 (0.95x FY14E BV,
50% discount to 6 yr avg P/BV of 1.9).
 Key Risks : Removal of import duty and rupee
appreciation is a key risk (details overleaf). Central
elections scheduled for 2014 may lead to further
increases in cane price (SAP) for SS14

Balrampur Chini Mills: Buy:: Business Line

Technicals: BASF, Suzlon, Balrampur Chini, IRB, Gujarat NRE Coke, Alok Ind:: Business Line

Balrampur Chini Mills (Buy, Target Rs.85) ::LKP

Balrampur Chini Mills (Buy, Target Rs.85)

Balrampur Chini Mills Ltd – BCML is one of the largest integrated sugar producer in India with a crushing capacity of 76500 TCD spread across 10 units in UP, 320klpd distillery and 126mw of saleable power to the state grid.

BCML is presently carrying one of the highest sugar inventory among its peers at 2.25lac tons valued at under Rs29 per kg as it has one of the most healthy balance sheets in the sector with long-term debt of only Rs6bn half of which would be repaid during the next one year.

BCML in our view is slated to record its highest volumes ever in co-generation and distillery operations this fiscal and we expect that the second half numbers would reflect higher profitability from the sugar operations as well with realizations hovering around Rs35 per kg presently for the company. We recommend a BUY on BCML at the CMP of Rs65 with a price target of Rs85

TECHNICAL VIEW

Technically, the stock has started an uptrend from the start of this year, as seen from the rising channel. In the process of this rising channel formation, it has also managed to break the downward sloping trendline which is a positive indication for the stock.

The stock is currently trading at the support zone of the channel at around 65 levels. We believe once the consolidation process completes the stock would resume its uptrend and may probably test the high’s of the channel around 85 levels.

Thanks and Regards

LKP Advisory

BALRAMPUR CHINI MILLS (Buy, Target Rs.80) :LKP Advisory

BALRAMPUR CHINI MILLS (Buy, Target Rs.80)

Ø  Balrampur Chini Mills Ltd-BCML is one of the largest integrated sugar producer in India with a crushing capacity of 76500 tcd spread across ten units in UP, 320klpd distillery capacity across its three units and 125mw of saleable power capacity.

Ø  With domestic sugar prices beginning to look up since July we believe that continuation of these early signals could make core sugar operations profitable for BCML which could end the current fiscal with profits of Rs1.3bn and next fiscal with profits of Rs2bn ( BCML paid cane arrears of Rs0.92bn last fiscal pertaining to season 2007-08 and our estimates are without taking any arrears into account)

Ø  BCML trading at 7xFY'13-14E earnings at a price to book of 1.3x looks an attractive bet at current levels for a one year price target of Rs80. Buy

 

Hold Balrampur Chini ; Target :Rs 49 ::ICICI Securities

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R e p a y m e n t   o f   s u g a r c a n e  d u e s   h i t s   e a r n i n g s …
Balrampur Chini posted dismal Q3FY12 results as it reported a net loss of
| 64 crore on the back of provisioning for the one-time payment of
sugarcane due of the sugar season 2007-08. Net sales grew by 22.9% to
| 662.1 crore led by higher sugar sales and improved realisations of the
distillery segment. At the EBITDA level, the company reported a loss of
| 11.3 crore due to higher raw material cost of sugarcane in the current
season and higher provisioning of previous year’s sugarcane prices. Net
losses can be attributed to erosion of earnings at the EBITDA level and
increasing interest expenses.
Operational performance
Sugar sales volumes increased to 1.96 lakh tonnes with average
realisations of | 29.7/kg compared to 1.48 lakh tonnes with average
realisations of | 28.7/kg in the corresponding quarter. Co-generation sales
improved to | 82.9 crore compared to | 17.5 crore in the corresponding
quarter on the back of higher volumes of 12.8 crore units with tariff of |
4.1/unit compared to 10.4 crore units with average tariff of | 4/unit. In the
distillery segment, sales improved from | 13.6 crore to | 23.6 crore on the
back of higher realisations of | 33.9/litre led by higher RS and ENA prices.
Industry outlook
We remain cautious on the outlook of UP sugar mills due to bleeding
sugar earnings. However, any decision on decontrol, increase in sugar
exports or favourable court decision on sugarcane prices would result in
a positive impact on the earnings of the company.
V a l u a t i o n
At the CMP, the stock is trading at 7.7x its FY13E EPS of | 5.9. We believe
that FY12 would be the last year of the negative cycle and a decline in
cultivation and production would result in sugar prices firming up in 2013
sugar season. However, we still remain cautious as government policy on
the sugar sector remains unpredictable. Hence, we maintain our target
price of | 49/share.

Balrampur Chini Mills: Bleak scenario ahead; valuation near trough levels :: Kotak Sec

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Balrampur Chini Mills (BRCM)
Sugar
Bleak scenario ahead; valuation near trough levels. BRCM’s reported results were
in line with our estimates. 2QFY12 is an off-peak quarter and hence insignificant. UP
government has increased SAP by ~Rs350 per ton. Cost of production (Rs30-32 per kg;
depending on efficiency) would be upwards of current realizations. News articles
suggest that mills would soon approach the courts. Given the scenario, we are unable
to project earnings pending concall. We are shifting our valuation methodology to P/B
based. The stock is quoting at lowest (0.9X FY2012E BV) end of its historical P/B range.
Retain BUY; target price of Rs60 (Rs80 earlier) at 1X FY2013E BV.

Hold Balrampur Chini ; Target : Rs 49 :: ICICI Securities

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S u b d u e d   p e r f o r m a n c e …
Balrampur Chini reported bleak Q2FY12 results. Net sales witnessed a
1.1% de-growth at | 502.8 crore as sugar volumes and realisations
remained flat during the quarter on a YoY basis. The company posted
profits at the operating level despite a lag in the sales performance on the
back of higher sales volume from  its distillery segment. The EBITDA
margins stood at 3.8% compared to negative margins in Q4FY11. Interest
cost for the company increased from | 23.1 crore in Q4FY11 to | 31.5
crore in Q2FY12. The company, thus, reported a net loss of | 39.4 crore
as against a loss of | 78 .3 crore in Q4FY11.
Operational performance
Sugar sales volumes and realisations remained flat in Q2FY12. BCL sold
1.59 lakh tonnes (lt) of sugar at an average realisation of | 28.2/kg against
1.55 lt at | 27.1/kg in Q4FY11. Distillery sales were relatively higher at
10,178 kilo litre (kl) at an average realisations of | 27.9/litre against 8520 kl
at |24.2/litre in Q4FY11. Power sales were negligible due to nonavailability of bagasse.
Industry outlook
With the UP government announcing a  relatively higher cane price of |
240/kg for the current year and sugar prices remaining at around | 29/kg,
we  remain  cautious  on  the  outlook  of  UP  sugar  mills.  However,  we  do
await any positive announcement in the sector such as, further allowance
of exports by the government and revival in domestic sugar prices, which
could help in protecting the margins of companies from eroding further
and improve earnings.
V a l u a t i o n
At the CMP, the stock is trading at 7.6x its FY13E EPS of | 5.9. The stock
is trading at ~45% discount to its  replacement cost of | 80/share. We
believe that FY12 would be the last  year of the negative cycle for the
sugar industry and a substantial decline in cultivation and production
would result in sugar prices to firm up from here. We do remain cautious
on the sector until the awaited decisions on de-control in the sector is
received. Hence, we are revising our TP from | 80 to | 49/share.

Balrampur Chini Mills: Buy : Business Line,

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Sugar stocks are usually best bought when the commodity is heading into a year of low domestic output, as that is when realisations and margins are at their highest levels for sugar producers. Given that sugar output is set to jump by 29 per cent in the current season (October to September 2011), this may not appear to be a great time to buy sugar stocks. However, the stock of Balrampur Chini Mills offers an attractive investment opportunity for those with the ability to hold on for two-three years.

The prospect of firm sugar prices over the next year or two, strong revenues and profits for the company from by-products such as ethanol and power, and low debt status, make it a safer bet in the sugar space. After a recent battering, the stock trades at an attractive valuation of just nine times its expected 2011-12 earnings. At the current market price of Rs 52, the company is also valued at less than half of the replacement cost of its assets (which is Rs 4,400 crore). As a purely domestic player with large and integrated capacities in Uttar Pradesh, Balrampur Chini Mills is not a direct beneficiary of the recent surge in global sugar prices or the government's move to allow additional sugar exports.

BRIGHTER SUGAR PROSPECTS

Producers with coast-based facilities may be better placed to capitalise directly on this trading opportunity. However, the company is still likely to benefit indirectly, as higher exports will help reduce sugar surpluses in the domestic market, which can bolster prices.

Consider this equation. Adding the estimated production of 243 lakh tonnes for this year (October 2010-September 2011) to the opening stock of about 35 lakh tonnes, the total sugar availability this year was in the region of 278 lakh tonnes. Domestic consumption of about 230 lakh tonnes would have left us with a closing stock of about 48 lakh tonnes to flag off the next season, about 2.5 months' consumption. However, that is without reckoning total exports of about 25 lakh tonnes (recent permission to export five lakh tonnes in addition to exports of 20 lakh tonnes already allowed). Accounting for that suggests year-end inventories to just over 30 lakh tonnes. That is sufficient to cover less than two month's offtake, well below normal levels of three months.

This suggests that sugar prices may firm up further from Rs 27-28 per kg in the ensuing year. As the cane procurement costs for producers such as Balrampur Chini have already plummeted sharply this year, profit margins from the sugar business appear set to witness a strong revival.

MORE FROM BY-PRODUCTS

The 10 per cent jump forecast for sugarcane output in the next sugar year (October 2011 to September 2012) will also allow Balrampur Chini to crush 12-15 per cent more cane in volume terms and process it into by-products such as ethanol and bagasse-based power.

Investments over the last four years have endowed the company with capacities to crush 76,500 tonnes per day of cane with a 320 kilolitres per day distillery, also producing 224 MW of power from bagasse.

With provisional ethanol prices fixed at Rs 27 /litre and attractive tariffs in the State of Uttar Pradesh (fixed until 2013-14) for bagasse-based power, both the distillery and power operations may chip in better sales and profits over the medium term.

In fact, it was the sharp jump in contributions from the distillery and power businesses that helped Balrampur Chini contain profits declines much better than its peers in 2010-11, a year of high cane costs. Even as the company's core sugar operations made a net loss in the recent June quarter (owing to it being a seasonally lean quarter), these losses were somewhat cushioned by a 64 per cent jump in profits from by-products.

DONE WITH EXPANSION

A final factor that makes Balrampur Chini Mills a preferred and relatively defensive stock in the sugar space is its low debt status.

With its capex plans concluded last year, the company's long-term debt stood at about Rs 680 crore in end-June.

Even taken with working capital loans of about Rs 720 crore, the company's overall debt-to-equity ratio is less than 1; which compares to two-three times for peers such as Shree Renuka Sugars and Bajaj Hindusthan.

The company has plans to completely pay off its debt over the next two years, which should reduce the interest burden during a period of rising interest rates.

The company recently concluded a share buyback programme, mopping up shares at an average price of Rs 71/share, reducing its equity base from Rs 25.9 crore to Rs 24.4 crore

Buy Balrampur Chini Mills (BACH.BO) Research Tactical Idea::Morgan Stanley Research,

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Balrampur Chini Mills (BACH.BO)
Research Tactical Idea
We believe the share price will rise relative to the country index over the next 60 days.
This is because the stock has traded off recently, making short term valuation much more compelling.
We estimate that there is about a 70% to 80% or "very likely" probability for the scenario.
Estimated probabilities are illustrative and assigned subjectively based on our assessment of the likelihood of the
scenario.
Stock Rating: Overweight
Industry View: Attractive

Buy Balrampur Chini; Target :Rs 81::ICICI Securities

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L o w e r   r e a l i s a t i o n s   h a m m e r   m a r g i n s …
Balrampur Chini Mills Ltd (BCML) reported its Q1FY12 results. Net sales
witnessed a QoQ growth of 20.4% to | 563.7 crore from | 538.8 crore in
Q6FY11 on the back of higher sugar sales volumes. However, sugar
realisations were lower QoQ by ~| 1/kg at | 27.2/kg. This was due to the
decline in sugar prices as the expected sugar production of the country in
SY12 is 26 million tones (MT) from 24.2 MT in SY11. Lower realisations
hit the margins considerably, pulling  it down to 7.9% in Q1FY12 from
12% in Q3FY11 and 44% in Q6FY11. The company is carrying 3.44 lakh
tonnes (LT) of sugar inventory at a  cost of | 26.5/kg. Interest cost
increased by 53.1% due to higher  working capital requirement. The
company reported a loss of | 19.9 crore due to lower sugar and ethanol
realisations and high inventory cost of sugar.
Operational highlights
During the quarter, BCML sold 1.67 LT of sugar, compared to 1.15 LT in
Q6FY11 and 1.65 LT in Q3FY11, at an average realisation of | 27.2/kg.
Distillery sales in Q1FY12 were 20,784 kilolitre (kl) compared to 18,942 kl
in Q6FY11 and 13,364 kl in Q3FY11. Blended realisations dipped to |
23.8/litre in Q1FY12 from | 27/litre in Q6FY11. This was due to lower
realisation from rectified spirit and extra neutral alcohol. Co-generation
volume also dipped from 21.8 crore units in Q6FY11 and 9.2 crore units in
Q3FY11 to 14.7 crore units in Q1FY12. However, power realisations were
higher on a QoQ basis at | 4.13/unit but lower on a YoY basis.
Valuation
At the CMP, the stock is trading at 8.6x its FY12E EPS of | 8.9 and 6.6x its
FY13E EPS of | 9.4. The stock is  trading at ~25% discount to its
replacement cost of | 80/share. With the government allowing sugar
exports of 1.0 MT under OGL, domestic sugar prices have moved up from
~| 27/kg in April-May, 2011 to ~| 29/kg currently. Going ahead, with the
lighter balance sheet on repayment of debt & improvement in domestic &
international sugar prices, we expect margins to improve. Hence, we
continue to stay positive on BCML and maintain our target price of | 81.

Balrampur Chini Mills:: Regulation - the swing factor § BNP Paribas

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Regulation - the swing factor
§ Misses esimates on lower distillery and sugar realization
§ FY12 to be driven by higher volumes and by-products
§ Regulation the swing factor; cane price vs de-regulation
§ TP of INR85 based on 1.5x P/BV; retain BUY
1QF12 misses estimates
BRCM missed our EBITDA and net
income estimate due to lower-thanexpected distillery as well as sugar
realization. EBITDA margin declined to
7.7% compared to 11.6% in 1QF11.
BRCM’s distillery realization at INR23.8
was down 9% q-q due to one-time
disruption in supplies but has now
recovered to INR26. Sugar realization
was INR27.2/kg compared to our
expectation of INR27.7/kg. On the positive
side co-gen segment profit was higher by
36% y-y due to an increase in volume.
Co-gen realization increased 3% y-y.
Regulation the swing factor; cane price vs deregulation
In the medium term, we expect regulatory decisions to have a significant
impact on the performance of BRCM stock. One key adverse outcome
could be a higher-than-expected sugar cane price in view of the
upcoming Uttar Pradesh election. On the positive side a key catalyst for
the stock is any action on de-regulation of the sugar sector. Management
sounded confident that some of the regulations like a levy quota and
release mechanism could be done away with. The company believes
sugar cane price deregulation is likely in the next crushing season.
Earnings call takeaways
1) BRCM expects FY12 production at 26mt compared to 24.3mt in FY11.
It expects a higher production increase in Uttar Pradesh compared to
Maharashtra and Karnataka. It expects the inventory as of September
2011 to be low at 3.5mt-4mt. 2) FY12 will be another volume-driven year
for BRCM. BRCM sugar production increased 30% y-y in FY11 and is
likely to increase by 10-12% in FY12. 3) As of 30 June, long-term loans
were INR7.2b and working capital loans at INR6.8b. The company
expects interest cost of INR1.25b for the year.
Retain BUY; reduce TP to INR85
We are reducing our TP from INR100 to INR85. We like BRCM because
of its strong balance sheet, low capex and high contribution from power
division and policy of distributing cash to shareholders. We are changing
the valuation methodology from EV/EBITDA to P/BV due to volatility of
earnings due to dependence on regulatory decisions, such as sugar cane
prices, exports, and de-regulation. Our TP is based on 1.5x P/BV at the
lower end of its five-year range of 0.6-5.6x, average of 2.1x. Risks to our
TP are a higher-than-expected sugar cane price in Uttar Pradesh and
higher-than-expected production leading to depressed sugar prices.

Balrampur Chini Mills – 5QFY2011 Result Update - Angel Broking

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 Balrampur Chini Mills – 5QFY2011 Result Update

Angel Broking maintains a Neutral on Balrampur Chini Mills.

Balrampur Chini Mills (BRCM) reported a poor performance for 5QSY2011 due
to increased cane cost and lower sugar realisation. Total sales grew by 21% to
`532cr in 5QFY2011, while PAT declined by 69% to `23cr. We are introducing
FY2012 estimates and rolling forward valuation on the same. At current levels,
the stock is trading at fair valuations; hence, we remain Neutral on the stock.
High raw-material cost and low sugar realisation impact margin: Gross margin
declined by 1,680bp to 27% in 5QFY2011 from 44% in 1QFY2011 due to
increased cane cost and lower realisation. BRCM incurred cost of `2,160/tonne of
cane in 5QFY2011. Further, realisation during the quarter stood at `28.7/kg
compared to `32.3/kg.

Strong Buy Balrampur Chini- Higher volumes drive topline; Target Rs 90; ICICI Sec

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Balrampur Chini - Higher volumes drive topline…
Balrampur Chini reported its Q5FY11 results. The sales grew by ~21% to
| 530.6 crore from | 433.6 crore in Q1FY11 on the back of higher
volumes. However, the margins dipped to 13.6% compared to 30.4% in
Q1FY11 on the back of a fall in realisation to | 28.6/kg against | 30.3/kg in
the corresponding quarter. The raw material cost also increased by ~57%
to | 389.6 crore. Interest cost and depreciation provisioning during the
quarter were on the same levels as in Q1FY11 and stood at | 17.4 crore
and | 28.1 crore against | 17.3 crore and | 26.9 crore, respectively. Lower
EBITDA at | 72.4 crore in Q5FY11 against | 131.6 crore in Q1FY11
dragged the bottomline also. It dipped ~70% to | 23.4 crore against |
76.6 crore in Q1FY11.

Credit Suisse: Balrampur Chini -Upgrade to NEUTRAL; Limited downside risks from here

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Balrampur Chini ------------------------------------------------------------------Upgrade to NEUTRAL
Limited downside risks from here

● Balrampur Chini’s December 2010 quarter results slightly
disappointed us due to lower sugar realisation. Higher revenues
and lower EBITDA margin were also partly due to Rs450 mn of reexports
of previously contracted raw sugar at close to nil profit.
● On the positive side, distillery realisations were higher than
expected and are likely to remain strong, as OMCs are buying
ethanol at Rs27/l and prices of other alcohols are also similar.
● Cane crushing has lagged expectations so far. All India production
estimates have been cut by 1 mn t. Chances of a significant
positive surprise on production now appear low. Domestic prices
are at a significant discount to international prices, our view on
which our view for the next 12 months is positive. All this should
protect downside to domestic prices in our view.
● We factor in full-year free sale sugar realisation of Rs29/kg and
increase our EPS for FY11E accordingly. We raise our target
price to Rs82 (from Rs70) and upgrade to NEUTRAL (from
UNDERPERFORM).

Credit Suisse: Balrampur Chini -Upgrade to NEUTRAL; Limited downside risks from here

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Balrampur Chini ------------------------------------------------------------------Upgrade to NEUTRAL
Limited downside risks from here

● Balrampur Chini’s December 2010 quarter results slightly
disappointed us due to lower sugar realisation. Higher revenues
and lower EBITDA margin were also partly due to Rs450 mn of reexports
of previously contracted raw sugar at close to nil profit.
● On the positive side, distillery realisations were higher than
expected and are likely to remain strong, as OMCs are buying
ethanol at Rs27/l and prices of other alcohols are also similar.
● Cane crushing has lagged expectations so far. All India production
estimates have been cut by 1 mn t. Chances of a significant
positive surprise on production now appear low. Domestic prices
are at a significant discount to international prices, our view on
which our view for the next 12 months is positive. All this should
protect downside to domestic prices in our view.
● We factor in full-year free sale sugar realisation of Rs29/kg and
increase our EPS for FY11E accordingly. We raise our target
price to Rs82 (from Rs70) and upgrade to NEUTRAL (from
UNDERPERFORM).

Kotak Sec:: Balrampur Chini Mills - Sugar In-line results: ADD; target Rs90.

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Balrampur Chini Mills (BRCM)
Sugar
In-line results. BRCM reported 5QFY11 EBIDTA at Rs724 mn (-45% yoy) vs our
estimates at Rs823 mn. Little bit of negative surprise has come on account of: (1)
Lower-than-estimated realizations in the distillery business (Rs26.7/lit vs our estimates at
Rs27/lit), and (2) lower-than-expected realization (Rs27.74/kg vs our estimates at
Rs28/kg) in the sugar division. We maintain ADD with a target price of Rs90.

Buy Balrampur Chini, Dec 10 Qtr: Sugar Shines- target Rs129: Morgan Stanley Research,

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Balrampur Chini Mills  
Dec 10 Qtr: Sugar Shines, Cogen & Distillery Disappoint 
Sugar Profitability Returns: BRCM reported
December quarter results with revenues, EBITDA and
PAT of Rs5.3bn, Rs724mn and Rs234mn.
Key highlights of the results: 1) Sugar division reporting
profits (Rs250mn) as against a loss in the previous
quarter (Rs540mn), 2) Realizations for sugar division
were down 10% YoY and 3) Unlike in Dec’10 quarter,
where BRCM had benefitted from carrying low cost
inventory, this time around BRCM has carried high cost
inventory in Q1. We do not expect cane prices to be bid
up this season and this combined with a tight domestic
sugar balance drives our OW rating on the stock.