Sugar 3QFY15E Results Preview:: HDFC Securities

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 Domestic sugar output in SS15 is likely to be ~25 mT (demand ~24
mT, opening inv 8.5 mT). Exports incentives by the govt should help in
reducing surplus. We expect ~2 mT of exports in SS15. Current ex-mill
price in MH/UP is Rs. ~26/~28 per kg vs. cost of production of Rs. 32-
34/kg.
 Global raw sugar prices are hovering below 15 c/lb due to ~5% higher
supply (~181 mT) than demand (~172 mT).
 Higher ethanol prices will lead to higher profits from the distillery
division. Sugar division will report losses due to lower realization.
 Ethanol blending at 10% is extremely positive for the sector.
However, in India we don’t have flexibility to route cane directly for
ethanol. Hence, ethanol production is limited to the extent of ~5%
molasses produced from sugarcane. There are talks of further
increase in ethanol realizations, however the falling crude price may
pose a risk.
 We see no structural change in the sector dynamics unless cane price
is linked to sugar price. The govt has provided some incentives to the
industry (interest free loans and waiver on some taxes). However, we
feel that the industry’s outlook will remains grim till complete
decontrol is established.

LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3010610