Sugar 3QFY15E Results Preview:: HDFC Securities

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Sugar in a nascent short-term uptrend:: Business Line

The Sugar No 11 contract, the benchmark contract for raw sugar futures, skyrocketed 9.5 per cent to a six-month high to finish the week at 18.48 cents a pound. On October 1, the contract jumped 4.8 per cent with an upward gap, decisively breaching its 200-day moving average. However, on the year-to-date basis, the contract is down 5.3 per cent.

This rally occurred as the market absorbed the biggest delivery against the October contract expiry and on signs of lower production in Brazil due to the impact of rains on cane production and sugar content.

LONG-TERM VIEW

The Sugar 11 contract has been in a long-term downtrend since peaking at the high of 36 cents registered in March 2011. This downtrend will remain in place as long as the contract trades below its significant long-term resistance band between 26 and 27 cents. An emphatic breakthrough of this resistance band will alter the long-term trend and take the commodity higher to 32 cents and then to 34 cents in the long-term time frame. However, failure to rally beyond the resistance band will confine the commodity to hovering in the broad range between 16 and 27 cents.

On the downside, the contract has key long-term support at 16 cents, from which it has reversed this July. A decisive fall below this long-term support will pave the way for a decline to 14 cents over the long-term. Key immediate long-term support is at 17 cents and resistances are positioned at 20 cents and 23 cents.

MEDIUM-TERM VIEW

The Sugar 11 contract has been on an intermediate-term downtrend since encountering key resistance at 26.7 cents in February 2012. Nevertheless, the contract found support at its significant long-term base level of 16 cents in this June. After a five-month sideways consolidation in the band between 16 cents and 17.3 cents, the contract broke out upwards last week. The commodity bottomed out this July at 16 cents and has been on a nascent short-term uptrend. The reversal was triggered by positive divergence in daily and weekly indicators. Sugar decisively breached its 200-day moving average last week and is hovering well above its 50- and 200-day moving averages.

But, the contract is facing key resistance ahead at 19 cents which it failed to surpass in March.

A strong breakout of this resistance will take the commodity higher to 20 or 20.4 cents in the short- to medium-term. Next resistance is at 21.6 cents. To revise this downtrend, the commodity needs to rally above the key resistance at 21.6 levels. In that scenario, sugar can trend higher to 23 cents in the forthcoming months.

On the other hand, fall below its immediate support at 17.6 cents will pull the commodity lower to 16.8 cents and then to 16 cents in the medium-term.

Short-term outlook for sugar weak :: Business Line

Raw-sugar poised at key support :: Business Line

LKP BYTES : Dharani Sugars & Chemicals (Buy@Rs.41, Target Rs.120)

The story so far ………..

Dharani Sugars & Chemicals – DSC belonging to the Chennai based PGP Group of companies is a fully integrated sugar producer and is a Rs6bn company with a sugar capacity of 10,000TCD, Distillery capacity of 160klpd and a 37mw co-generation power plant spread across its 3 units in Dharani Nagar, Polur & Villupuram all in Tamil Nadu. DSC derives 80% of its revenues from sugar and 20% from distillery and co-generation.

DSC undertook a massive capacity expansion in all its 3 business verticals last fiscal and this was funded entirely by debt as a result of which every penny earned last fiscal was eaten up by the interest cost and its long-term debt equity ballooned to 2.7x while its total debt equity rose to 4x and at 1x EV to sales the market capitalization now stands at just Rs1.2bn. 

The story ahead ………..

We expect DSC to post a 230% rise in net profits this fiscal to Rs330mn driven primarily by the sugar business as we expect the average realization to be Rs32 per kg as against Rs28 per kg in the last two years. DSC pays a substantially lower price for the cane as compared to its peers in the western and northern parts of India. During H1 this fiscal the gross margins from the sugar business improved 4 times as compared to the same period last fiscal. Higher than average crushing days in line with mills based in southern India along with a recovery of more than 9% would in our view ensure that the sugar division performs to its potential this fiscal.

With the 100klpd distillery going on stream in October 2012 we believe that the 5% mandatory ethanol blending program augurs well for DSC next fiscal and this segment along with co-generation would contribute well for the first time next fiscal. The 22mw co-generation at its new unit fetched a realization of Rs4.4 per unit which is higher than the rate at its old unit and we expect DSC to post a net profit of Rs500mn next fiscal as the integrated sugar model plays out well in FY’13-14.

DSC trading at 2.5xFY13-14E earnings of Rs17 is in our view the best available small cap integrated sugar play and we recommend a BUY with a one-year price target of Rs120.

Thanks and Regards

LKP Advisory

Lower production sweet for sugar companies:: Business Line

Sugar -Sector Update- Centrum

Sugar

Rangarajan Panel report for sugar sector extremely positive for companies

The Government of India had constituted a committee under the chairmanship of Dr C Rangarajan, Chairman, Economic Advisory Council to the Prime minister of India to comprehensively look into all the issues related to regulation of the sugar sector, and suggest ways and means to change those regulations in a manner that better promotes efficiency and investments, and sets this sector on a higher growth trajectory, increasing employment in rural areas and enhancing incomes of all those involved in this sector. The committee submitted its report to the government on October 12, 2012. We believe that there are high chances of levy quota removal at this point of time and if that happens there will be a significant improvement in the earnings of sugar companies (refer Exhibit 1). We believe that risk-reward ratio is favorable for sugar stocks, where we see upside for stocks in the range of 40-50% if levy quota is removed driven by significant earnings improvement.   

Sugar has upside till Rs 4,000/quintal : Geojit Comtrade in Business Line

Following a series of healthy fundamental factors, sugar prices in futures and spot market have witnessed an escalation since the first week of June. Prices tested a two-and-a-half-year high last month.

Futures prices on the National Commodities and Derivatives Exchanges (NCDEX) climbed from Rs 2,800 a quintal level in June to Rs 3,600 levels by mid-August, a surge of over 25 per cent. Domestic retail prices, too, mounted to Rs 40 a kg from Rs 30 during this period. However, prices somewhat cooled down after a few measures taken by the Government.

Sugar in short-term uptrend :: Business Line

The Sugar No 11 contract, that is the benchmark contract for raw sugar futures, rose 2.2 per cent to 22.73 cents a pound lat week. On July 10, raw sugar had touched a near three-month high of 23.05 cents. From the year-to-date low of 18.86 cents registered on June 4, sugar has advanced 20.5 per cent so far. It is now just 2.5 per cent below the price from the beginning of the year.

Sugar’s turnaround has been fast due to unfavourable weather conditions in Brazil and India, the top two producers of sugar and major exporters. According to the US Department of Agriculture, sugar production in Brazil declined to a three-year low of 36.2 million tonnes (mt) in the 12-months ending April 2012.

Sugar ƒ : Q4FY12 Result Preview: ICICI Securities, PDF Link

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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf

Sugar
ƒ Domestic sugar production to be lower in coming season (SY13)
India’s sugar production in SY12, up to March 31, has been 23.2 million
tonnes (MT) (higher by ~13% against corresponding period last year).
Output in Maharashtra  was up 11.1% to 8.1 MT while production in
Uttar Pradesh stood at 6.6 MT, up 12.7%. India’s total production for
SY12 is expected to be ~26 MT against 24.2 MT in SY11. Despite 3 MT
of exports allowance the year, inventory levels have remained high at
~6.8 MT. High production, increasing inventory levels and stable
consumption have resulted in subdued sugar prices at ~28-29/kg. With
the glut in the system, sugarcane arrears have increased drastically to
~| 9,900 crore by March 2012. We believe rising arrears would result in
a decline in area under cane acreage in SY13. Going ahead, with a fall in
production, we believe sugar prices would improve to ~| 32/kg in SY13.
ƒ Global surplus to shrink
With the expected fall in Indian production and flat output in South
Central Brazil (31.2 MT in SY12)  next year, world sugar surplus is
expected to shrink to ~5 MT from ~10 MT in 2011-12. We believe
global sugar prices would remain firm at 24-25 cents/lb and any dip in
production in other exporting countries (Thailand and Australia) could
lead to even higher global prices, going forward.

Sugar Sector: Q2SY12 Result Preview: Centrum

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Profits to remain under pressure
We expect the profitability of sugar companies to remain
under pressure impacted by higher sugarcane costs. The Uttar
Pradesh government increased the SAP (State Advised Price)
for Sugarcane to Rs240/quintal for SY12 against Rs205/quintal
in SY11. Though, we expect Triveni Engineering and Bajaj
Hindusthan to report profits in the quarter, we believe that
these companies will incur losses in SY12E. In the quarter, we
expect Shree Renuka Sugars to report losses mainly due to
higher depreciation costs and interest expenses. Average
sugar price (M grade Mumbai) during the quarter declined
0.9% QoQ to Rs30.4/kg. Going forward, we believe that the
increase in sugar production to 25.5mt in SY12E against
24.2mt in SY11 will lead to an increase in inventory levels,
which in turn, will put pressure on domestic sugar prices
leading to subdued profitability of companies. Though, we
have a Buy rating on Shree Renuka Sugar (after assigning
benefits of potential hive off of the power business in Brazil)
and Triveni Engineering considering historic valuations and
its 21.8% stake in Triveni Turbine Ltd, the stocks could be
under pressure in the near-term because of pressure on
domestic realizations. We maintain Sell rating on Bajaj
Hindusthan. The triggers for upside would be a) building up of
cane arrears in this crushing season b) higher than expected
sugar price and c) decline in area under sugarcane cultivation
for next crushing season.
􀂁 Sugar price declines on a sequential basis: Sugar price (M
grade Mumbai) during the quarter declined 0.9% QoQ to
Rs30.4/kg (up 5.9% YoY). Current sugar price (M grade Mumbai) is
at Rs30.7/kg. Going forward, we believe that sugar price will be
under pressure due to higher estimated sugar production in
SY12E.
􀂁 Export of 2mt allowed during the quarter: The government
allowed 2mt of sugar exports under OGL (Open General License)
quota in this quarter, which will help the companies generate
additional profits.
􀂁 Increase in global sugar price on a sequential basis: Global
sugar price increased 5.4% QoQ to US$628 during the quarter.
On a YoY basis, global sugar price declined by 7.1% YoY. The
sequential improvement in global price was driven by the
expectation that the Brazilian sugar production will be under
pressure in the next year.
􀂁 Valuations attractive though near-term challenges persist:
We have a Buy rating on Shree Renuka Sugar (after assigning
benefits of potential hive off of the power business in Brazil) and
Triveni Engineering considering historic valuations and its 21.8%
stake in Triveni Turbine Ltd. However, these stocks could be
under pressure in the near-term because of our expectation of
pressure on domestic realization considering higher sugar
production in SY12E. We maintain Sell rating on Bajaj
Hindusthan. The triggers for upside would be a) building up of
cane arrears in this crushing season b) higher than expected
sugar price and c) decline in area under sugarcane cultivation for
next crushing season.

Sugar in short-term consolidation:: Business Line

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In this week's Commodity Corner we decipher the two commodities — sugar and corn. The benchmark for raw sugar, the Sugar No. 11 contract fell 2.7 per cent to $24.21 in the previous week. Ever since peaking out in February 2011 at $36, the sugar contract has been on an intermediate-term downtrend. Encountering resistance at around $31 in July and August 2011, the contract resumed its downtrend. Medium-term trend is also down for the contract since then.

The contract is trading well below its 200-day moving average, which was conclusively breached last September. Further, it penetrated a significant long-term support at $25 in November last year, that later turned into significant resistance. But, the next long-term support positioned at $23 provided base for the contrast from late November to early January 2012. The key resistance at $25 arrested the contract from moving beyond it in the previous week. The contract has been on a short-term sideways consolidation phase confining in the band between $23 and $25 from late November 2011.

SHORT-TERM VIEW

The contract is currently reversing downwards from the key resistance at $25. This decline can continue and test the lower boundary of the sideways band at $23 in the ensuing weeks. Strong weekly close below this level will pull the contract lower to $21. On the other hand, decisive jump above $25 can lift the contract northwards to $26 initially and to $27.2, which is 50 per cent fibonacci retracement level of the medium-term downtrend.

MEDIUM-TERM VIEW

An emphatic decline below the key support band between $20.5 and $21 will reinforce the intermediate-term downtrend and drag the contract down to $18. Conversely, the contract needs to rally above $28 to reverse this downtrend and push it higher to $30 and to $31.3 in the medium-term.

CORN

The corn contract bottomed out in September 2009, taking support from its long-term base level of $300. It has been on a long-term uptrend since then. Following an intermediate-term corrective downtrend from its June 2011 peak at $799, the contract found support in December 2011 at $580, which is a key base level. Triggered by positive divergence in the daily relative strength index and moving average convergence divergence indicator, the contract reversed its direction upwards. Nevertheless, the contract is facing key resistance at $660.

An emphatic breakthrough of the immediate resistance level $660 will pave way for a rally to $690 in the medium-term. Only a strong move above $690 will alter its downtrend and push the contract higher to $730. Next long-term resistances of the contract are pegged at $750 and $800, which is the long-term target.

But a strong fall below the key support level $580, can pull the contract lower to $550 and to $520 in the medium-term. A conclusive weekly close below $490 will mitigate the long-term uptrend and drag the contract down to $450 and to $400 in the long-term. The contract advanced 5 per cent in the last week to finish at $641.7. Short-term supports are positioned at $625 and $600. Resistances are at $660 and $670.

Sugar 􀂃 ICICI Securities 3QFY12 preview

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Sugar
􀂃 Sugar prices remain at ~| 30 / kg, sugarcane cost likely to go up
Sugar prices during Oct-Dec 2011 quarter has surged as high as | 34 per
kg. However, average prices have remained around | 30 per kg.
Simultaneously, increase in sugarcane cost to | 240 per quintal would
have a negative impact of margins from sugar segment. We believe
government would allow further sugar exports only after UP Elections,
which could push up the domestic sugar prices upward.
Simultaneously, almost 20% rupee depreciation has also resulted in
higher export realisations for Maharashtra based sugar companies.
􀂃 Global sugar prices to remain between 20-25 cents/ lb
Global sugar prices have come down from 36 cents in Jan-Feb 2011 to
22-23 cents currently. Production loss in Brazil has been set-off by the
excess supplies from Russia, India and Thailand. For the companies with
the Brazilian operations, dip in volumes would affect the topline growth.
However, 20% currency depreciation would result in higher export
realisations from Brazil.
􀂃 Domestic sugar production could cross 26 million tonnes
Sugar production in the current 2011-12 season could increase above
26 million tonnes, which would coerce government to increase the
exports quantities. We believe higher production would result in
depressed earnings for the millers and would further result in decline in
area under sugarcane cultivation in March 2012. We believe in the next
sugar season (October2011-September 2012) sugar production would
witness a considerable decline.

Sugar - Q1SY12 Results Preview - Profits to remain under pressure - Centrum

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Q1SY12 Results Preview

Sugar

Profits to remain under pressure

We expect the profitability of sugar companies to remain under pressure impacted by higher sugarcane costs. The Uttar Pradesh government increased the SAP (State Advised Price) for Sugarcane to Rs240/quintal for SY12 against Rs205/quintal in SY11. Higher cane costs will impact the profit of UP based mills adversely and we expect them to report losses in SY12E. Average sugar price (S grade Mumbai) during the quarter was up 5.9% QoQ to Rs29.9/kg. Going forward, we believe that the increase in sugar production to 25.5mt in SY12E against 24.2mt in SY11 will lead to an increase in inventory levels, which in turn, will put pressure on domestic sugar prices leading to subdued profitability of companies. Post a steep correction of 35-53% in the stock prices since our sector initiation in September ’11 and cyclical-low valuations, we had upgraded our coverage universe (Triveni- from Hold to Buy and Bajaj Hind- from Sell to Hold) post Q4SY11 results. However, there can be near-term challenges due to higher than expected sugar production, which may put pressure on sugar prices. The triggers for upside would be a) building up of cane arrears in this crushing season b) further allowance of exports by the government c) higher than expected sugar price and d) decline in area under sugarcane cultivation for next crushing season.

Impact Analysis- Sugar Exports ::Angel Broking

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Snapshot
Sugar Exports permitted for 2011-12 season
Mills profit margins to improve on exports
Decision on India's sugar exports dampens global prices
Decision to scrap sugar stock limit
Delayed cane crushing operations to pick up after export decision

Sugar :: Q2FY12 Result Preview::ICICI Securities

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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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Q2FY12 Result Preview:: ICICI Securities,

http://indiaer.blogspot.com/2011/10/q2fy12-result-preview-icici-securities.html

Sugar: Cane production estimates in Brazil moving down :":Kotak Sec,

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Sugar
India
Cane production estimates in Brazil moving down. The last two months have seen
reduction of cane production estimates in the center-south (CS) region of Brazil from
levels of ~570 mn tons in June 2011 to ~500 mn tons as of now. While the resultant
high prices of raw sugar is positive in the medium term, it also opens up risks of
government (Brazil) interventions in the sector. As per current estimates, cane
production in FY2012E would be ~10% lower than last year, which could mean a
severe (more than last year) shortage of ethanol for fuel as we approach the end of
season in March 2012. In our view, prices could spike to levels higher than last year
which might force the government to intervene by imposing regulations to discourage
the production of sugar which could be negative for the sector


Brazil – cane production estimates for FY2012 (March-ending) revised downwards
The last two months have seen reduction of cane production estimates for the center-south (CS)
region of Brazil from levels of ~570 mn tons as of June 2011. The key downgrades were:
􀁠 2nd half of August 2011: Canaplan (Brazilian consultancy firm) revised its estimates (earlier
also at the lower end of the range) for cane production and sugar production in the CS region
of Brazil to 476 mn tons and 28 mn tons, respectively. Just before this, UNICA had reduced its
estimates for CS cane production to 510 mn tons.
􀁠 2nd half of July 2011: Kingsman lowered its forecast for the CS sugarcane harvest to 525 mn
tons from 560 mn tons earlier. Also, sugar production estimates for the CS region were revised
downwards to 31.8 mn tons from 33.8 mn tons earlier. Around the same time, UNICA revised
its cane production estimates to 533 mn tons (CS).
Assuming CS cane production at 500 mn tons for FY2012E (March-ending) would mean 10%
decline from last year’s cane production. While cane production estimates have been reduced by
~12% since the beginning of the year, estimates for production of sugar have only been reduced
by ~5% to 31.6 mn tons (UNICA estimates for CS). As it is more profitable to manufacture sugar
rather than ethanol, mills would maximize production of sugar over ethanol and hence, decline in
ethanol production would be more than the decline in the cane production. As per UNICA, 48%
of sugarcane would be converted into sugar in FY2012E (March-ending) versus ~45% in the
previous year.
Sugar prices would remain strong in FY2012E (March-ending)
The production downgrades highlighted above should keep global raw sugar prices at elevated
levels, at least till the start of crushing season in the northern hemisphere October 2011 onwards.
In that case, Renuka Sugars should be able to sustain realizations of US cents25 per lbs for the
current Brazilian sugar year (April-March). Also, the company is taking advantage of the current
high prices to hedge next year’s production. As per the management, it has already hedged 40%
of next year’s production at a floor price of US cents24 per lbs and cap price of US cents30 per lbs.
We are assuming prices of raw sugar at US cents23 per lbs in FY2012E and FY2013E in our
earning estimates. In case prices sustain the current levels, it could mean an upside to our
estimates.

Sugar 􀂃 Global prices move northwards ::Q1FY12 Result Preview -ICICI Securities

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Sugar
􀂃 Global prices move northwards
Global sugar prices remained subdued in April - May, 2011 on back
of improved production in Thailand (second largest exporter).
However, prices surged from 21 cents/lb to 28 cents/lb in June, 2011
on back of ~21% decline in sugar production in Brazil led by higher
diversion (almost 57-59% towards ethanol and lower recovery rates
(12% compared to 12.3%). We believe sugar production in Brazil
would increase during its peak crushing time (July-October) but will
not exceed last year’s production. Hence, this would limit the
downside in global sugar prices. Shree Renuka Sugar’s presence in
Brazil would result in higher consolidated margins for the company.
􀂃 High by-product volumes to lead to improvement in earnings
With higher availability of sugarcane, by-product volumes in the
June quarter would improve significantly. We believe higher
realisations from ethanol (~| 27/litre) and power (~| 4/unit) would
lead to higher earnings in the June quarter for millers.
􀂃 Further 5 lakh tonnes of exports being allowed
Government has allowed Indian mills to export further 0.5 million
tonnes (MT) in June 2011 under the open general licence (OGL). It
had allowed 1.2 MT under advance licence scheme (AGL) in October
2010 and 0.5 MT under OGL in April 2011. We believe 2.2 MT of
outgo of sugar would lead inventory levels to fall to~ 4-5 MT in
September 2011, which would drive domestic prices to ~| 30/kg.


Company Specific View
Company Remarks
Balrampur
Chini
We estimate sugar sales volume will be lower at ~1.5 lakh tonnes with an
improvement in realisations to ~|28.7/kg. Moreover, led by higher sales volume
from distillery, estimated at ~22,400 kl (~88% higher YoY) and higher realisations at
| 27/litre, we expect revenues to witness a marginal improvement of ~6% YoY
Bajaj
Hindustan
We expect the company to sell 3.0 lakh tonnes of sugar at average realisations of |
28.7 per kg. With increasing volumes of by-products and strong distillery realisations
remaining at | 27 per kg and power realisations at | 4.1 per kg, we expect margins
to improve from 25.3% in Q2SY11 to 26.3% in Q3SY11
Dhampur
Sugar
Lower sales volumes of sugar at ~1.05 lakh tonnes at an average realisation of ~|
28.5/kg would keep revenue growth in Q1FY12 capped. However, lower cane cost
and higher realisations from ethanol would drive the margins back to black,
simultaneously improving the earnings for the company
Shree Renuka
Sugars
In Indian operations, we expect the company to witness 2.4 lakh tonnes of volume
with average realisations of |27.6 per kg. However, in Brazil, we expect the company
to sell ~2.9 lakh tonnes at an average realisations of 24 cents/lb
Source: Company, ICICIdirect.com Research

India's sugar production up by 24% so far :: Angel Broking,

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India's sugar production up by 24% so far
The ISMA announced that India’s sugar production has increased by 24% to 22mn tonnes
till February 15, 2011. Crushing in Maharashtra is still on, while it is nearing closure in
Uttar Pradesh. Given the continuing crushing season in Maharashtra, we believe
production figures would be revised upwards as the season draws to an end by September.
We maintain our annual production target of 26mn tonnes for SY2011 and expect India to
be a sugar-surplus state even after the export 0.5mn tonnes of sugar. Consequently, we
expect sugar prices to continue to remain at subdued levels. We maintain our Neutral view
on the sector and our stocks Bajaj Hindusthan and Balrampur Chini Mills.

Sugar : Q4FY11 Result Preview: ICICI Securities

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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.