In a research report dated September 27, 2023, Sharekhan has expressed a bullish sentiment on Balrampur Chini Mills and recommended a “buy” rating on the stock, with a target price of Rs 495.
Sharekhan’s research analysis focuses on several key factors that underpin their positive outlook on Balrampur Chini Mills:
- Sugar Price Surge: They note that the expected decline in India’s sugar production for the upcoming season, coupled with lower global output, has led to a significant increase in sugar prices. This surge in prices, with domestic prices up by 8% year-on-year and 11% compared to April 2023 levels, is expected to contribute to higher realizations for Balrampur Chini Mills in the forthcoming quarters.
- Capacity Expansion: The company’s expansion in crushing capacity and debottlenecking efforts are anticipated to result in a substantial increase of approximately 10% in sugar crushing for Sugar Season 2023-2024.
- Ethanol Production: With expanded ethanol production capacity, Balrampur Chini Mills is projected to achieve 31-32 crore liters of ethanol production and 28-29 crore liters of sales for the fiscal year 2024.
- Focus on Recovery Improvement: The company’s focus on enhancing recovery rates through changes in sugar variety and a higher ethanol mix is expected to yield working capital savings in the future.
Sharekhan’s outlook is positive, and they reiterate their “Buy” rating for Balrampur Chini Mills Limited (BCML) with a revised price target (PT) of Rs. 495. Currently, the stock is trading at 17x/14x its earnings estimate for FY2024E/FY2025E, and the rising sugar prices along with an increasing mix of ethanol provide a favorable and consistent earnings outlook in the near term.
Investors considering potential investment opportunities in the sugar sector may find Sharekhan’s recommendation on Balrampur Chini Mills worth considering as they make their investment decisions.
