Shares of Dwarikesh Sugar hit a new high of Rs 113.70, on rallying 9 per cent on the BSE in Wednesday’s intra-day trade on expectation of strong earnings. The stock of sweetener company has zoomed 41 per cent in the past eight trading days.
In the last one week, the stock outperformed the market by surging 25 per cent, as against a 3 per cent decline on the S&P BSE Sensex. At 09:48 am; the stock was up 5 per cent at Rs 109.75, as compared to 0.40 per cent gain on the benchmark index.
Dwarikesh Sugar is an Uttar Pradesh based sugar company with sugar crushing capacity of 21,500 TCD, distillery capacity of 163 KLD & co-generation capacity of 91 MW.
In October-December quarter (Q3FY22), the company reported a near four-fold jump in profit after tax (PAT) at Rs 28.88 crore, as against Rs 7.47 crore in Q3FY21. Total income grew 56 per cent year-on-year to Rs 602 crore from Rs 385 crore in a year ago quarter. Sugar segment sales growth was led by higher domestic sales quota and increase in sugar realisation.
Dwarikesh Sugar said estimated sugar production during the ensuing season 2021-22 is in excess of 31 million tons after considering 3.4 million tons of sugar sacrifice in favor of ethanol. Execution of our 175 KLPD distillery project at DD unit is on schedule in spite of inclement weather and unseasonal rains. The plant is likely to be commissioned in June, 2022, the company said.
Dwarikesh Sugar is one of the most efficient sugar companies with abundant sugarcane availability, best sugar recoveries in UP and aggressive distillery expansion.
Analyst at ICICI Securities believes sugar prices would move up to Rs 36-37/kg by April 2022. The increase in distillery volume and higher sugar prices would result in significant jump in operating margins & earning for the sugar companies. With aggressive distillery expansion, Dwarikesh Sugar would be one of the biggest beneficiary in the sugar industry. Given most sugar companies are still trading at single digit multiples on FY24 earnings, there is enough scope for multiple expansion, the brokerage firm said.
“With increasing profitability & reduction in sugar inventory, Dwarikesh Sugar would be able to generate cumulative Rs 517 crore free cash flows in the next three years. It would completely de-leverage the balance sheet,” ICICI Securities said, with ‘buy’ rating on the stock and target price of Rs 135 per share.