Sugar share price target

India, the world's second-largest sugar producer after Brazil, is seeing a surge in retail sugar prices shot up 40% in the past year, reaching an all-time high of Rs 44 per kg. However, the sugar industry faces challenges such as lower production, high diversion towards ethanol manufacturing, and export quotas.

Global sugar prices have crossed US cents 20/lb while simultaneously domestic prices have also moved up to | 36/kg (UP). In our July 2021 sector report, we reiterated our positive stance on sugar prices, distillery capacity expansion & subsequent high earnings growth for next three years. Our view on sugar prices has been materialising. We maintain our stance that the sugar industry would be able to export 6-7 million tonnes (MT) of sugar in the 2021-22 sugar season without export subsidy given global sugar prices are higher than cost of production for Indian sugar companies. This would lead sugar inventory levels to come down to below 7 MT by...

We initiated coverage on the sugar sector with our August 2019 sector report' on the premise of rationalising sugar inventory levels in the country and possibility of significant sugarcane diversion toward producing ethanol. Our view is materialising given sugar inventory levels are coming down from the peak of 14.5 million tonnes (MT) in September 2019 to ~8 MT in September 2021. Further, in the current sugar season, the industry would be diverting (sacrificing) 2 MT of sugar for ethanol production. With the government's aggressive stance on increasing ethanol blending with petrol...

SUGAR IN A SWEET SPOT

We recently hosted a call with Abhinash Verma, Director General of Indian Sugar Mills Association (ISMA).

It's sweet tidings for India's sugar industry. Propelled by tailwinds like favourable policy push and government intervention, Indian sugar companies are poised to see healthy growth in sugar.

We met senior officials of the Maharashtra State Co-Operative Sugar Factories Federation (MSCSFF) which has 190 co-operative sugar mills operating in the state as members.

The sugar industry is going through transformational changes through various government & industry efforts to make business models more sustainable by increasing the ethanol-blending target to 10% by 2022 & 20% by 2030. Moreover, with the introduction of concept of minimal selling price (MSP) for sugar, losses in the sugar business can be avoided. With new bio fuel policy introducing ethanol production through B' heavy route, most sugar companies are expanding their distillery capacity. Also, the government has approved a soft loan (interest subvention of 5%) for 114...

Global sugar production in 2015-16 is expected to fall by 3 mn tonnes to 172 mn tonnes. Sugar consumption is expected to reach a 173 mn tonnes, reducing end season stock by 4 mn tonnes. Further, the International Sugar Organization (ISO) has raised the world sugar production deficit to 3.53 mn tonnes for 2015-16 from its earlier estimate of ~1 mn tonnes and 6 mt for 2016-17. Brazil, the world's largest sugar producer, is expected to have lower sugar production of ~35 mn tonnes (-9% YoY) on account of El Nino and mandatory ethanol conversion. This, along with fall in global sugar inventory to ~67 days (vs 75 days) is likely to keep international...

Chemicals & Fertilisers, Oil & Gas, Sugar : 4QFY15E Results Preview