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ICICI Securities
Balrampur Chini (Buy)
Target: ₹190
CMP: ₹142.05
Balrampur Chini (BCML) reported a strong set of numbers with revenue growth of 50.8 per cent, driven by 60 per cent growth in sugar & distillery sales.
The growth in sugar sales was led by 62 per cent jump in volumes due to higher domestic sales quota and exports. The robust growth in distillery sales was driven by 39.1 per cent growth in volumes aided by new capacity and 15.9 per cent increase in realisation (due to higher proportion of B heavy ethanol). Power revenues were down 13.5 per cent with significant decline in volumes as company preferred to sell bagasse given significant reduction in power tariff last year.
BCML is the most efficient sugar company with sustainable earnings and strong cash flows.
The company has optimum distillery capacity to divert 65 per cent of its sugarcane to produce B heavy ethanol. This would result in sufficient sacrifice of sugar to keep inventory at comfortable levels (one to two moths) before the season starts.
We estimate the company would generate ₹697 crore and ₹787 crore operating cash flow in FY21 and FY22, respectively. We value the stock 1.5x FY21E price to book with a revised target price of ₹190/share.
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