Dhampur Sugar Mills Ltd. share price target

The company would be increasing its sugarcane crushing by 5-10% in next one year. This would help it utilise the additional sugarcane for the production of ethanol through sugarcane juice We expect cumulative free cash flow of | 731 crore in the next three years,...

Dhampur Sugar is undertaking a capacity expansion of 100 KLD distillery in its Asmoli plant with a capex of | 130 crore. Further, it has also announced capex of 150 KLD distillery at Dhampur (including 50 KLD grain)...

Dhampur Sugar reported strong Q4FY21 results with 33.7% growth in operating profit. Revenue remained flat given sugar sales volumes fell 4.2% on account of lower domestic sales quota & delay in export subsidy announcement. Moreover, domestic sugar prices also remained subdued during the quarter given peak sugar crushing season & low winter demand. Distillery sales was up 23.6% mainly on account of 13% increase in volumes in Q4. The company contracted for ~9 crore litre of B-heavy ethanol for 2020-21 ethanol season (December 2020- November 2021). Power volumes...

Dhampur Sugar posted a strong set of results with 36% revenue growth & 22.2% growth in operating profit. The healthy growth was led by higher sugar & distillery volumes. Further, distillery realisation also improved significantly on account of higher proportion of B-Heavy ethanol. Sugar volumes were up 33.9% to 2.45 lakh tonnes (lt) aided by higher domestic sales quota whereas distillery volume were up 70.4% to 3.2 crore litre on the back of high availability of molasses due to extended 2019-20 crushing season. The company is holding 1.87 lt of sugar valued at | 30.5/kg as on...

With more than 2.5 lt of export in sugar season 2019-20 & considerable sugar sacrifice from sugarcane diversion towards B heavy ethanol, DSL generated | 940 crore of operating cash flow in H1FY21. This resulted in working capital debt reduction of | 800 crore in last one year. The company would divert 80% of sugarcane towards B heavy ethanol in 2020-21 sugar season, which would help it keep sugar inventory at low level. Higher diversion towards B heavy is also aiding it to receive high domestic sale quota (Oct-Nov1.63 lt). We expect strong free cash flow generation of | 588 crore & | 651 crore in...

MSP hike, export subsidy to perk up earnings, cash flows The government is expected to increase minimum selling price (MSP) of sugar by | 2 /kg in consideration of higher cost of production (CoP) for a benchmark non-integrated sugar mill. In conjunction with a hike in sugar floor price, sugarcane price is also expected to increase by | 10/quintal, leading to | 0.85/kg increase in CoP. This move would increase gross margins for sugar mills by | 1.15/kg, which ultimately flow to PBT. Further, to manage higher sugar inventory [11.5 million tonnes (MT) by September...

Though sugar manufacturing continued during lockdown period, sugar consumption in the country declined by 1.0-1.5 million tonnes (MT) with a substantial reduction in ice creams & carbonated drinks sales. Moreover, sugar exports, which were expected to touch 6.0 MT in current sugar season, are now likely to be restricted to 4.5 MT. Both these factors would lead to higher than expected sugar inventory at 11.0 MT by end of September 2020. We believe the government would continue export subsidy next year also, which could help industry reduce sugar inventory...

Cash flow boost led by B heavy ethanol, exports Dhampur has the most optimum distillery capacity (400 KLD) to utilise B heavy molasses. The company has contracted 7 crore litre of ethanol with OMCs in its first tender. We expect the company to clock distillery sales of 11.4 crore litre (including country liquor) in FY20E and 12 crore litre in FY21E. Considering higher monthly sales quota of 60,000 tonnes each in Jan-Mar & 80,000 tonnes of exports, the company is expected to sell 2.6 lakh tonnes of sugar in Q4. Considering current sugar inventory of 3.4 lakh tonnes and...

Higher distillery volumes, exports to perk up revenue The company has commissioned 100 KLD distillery in April 2019, which has given Dhampur flexibility to produce additional ethanol through B heavy route. The company would be producing B heavy molasses from three out of its five plants. We expect 21.8% CAGR distillery sales in FY19-21E. Moreover, the company has contracted 1.55 lakh tonnes of sugar exports within mere 1.5 months of new season. Both higher diversion towards B heavy molasses and 1.55 lakh tonne of export would not only aid revenue...

Sugar prices recover on World deficit forecast Strongest El Nino since 1997, has actually limited supplies from top producers Brazil, India, European Union (EU) and Thailand and may...