Target: ₹500

CMP: ₹356.05

The current share price of Balrampur Chini (trades at 10.5xFY26EPS), we believe, disregards: improving sugar prices (ex-mill sugar price at 37-38/kg despite the peak production season) with likely reduction in acreage in Maharashtra and Karnataka (water availability challenges) in the coming season; its increased ethanol capacity (and, hence, earnings); significant operational cash flow generation (average annual OCF of ₹600 crore; value of its 33.7 per cent stake in Auxilo Finserve (owns 165.3mn shares worth ₹690 crore, basis the recent fund-raise valuation; and option value towards its foray into polylactic acid, which can be as large as 15-25 per cent of the current market cap.

BCML’s foray into PLA , we think it is a step in the right direction to de-risk the dependence on sugar production/prices as it diverts sugar into PLA, and capitalise on the huge growth potential outside the sugar industry that PLA offers.

While the company has not disclosed any financial aspects on this new line of business, our primary analysis indicates substantial value creation (theoretically up to ₹2,000 crore). We have not factored in PLA investments into our estimates as critical financial details pertaining to pricing/margins/RoCE have not been disclosed ye

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