Balrampur Chini Mills Ltd is a sugar manufacturing company and a second largest sugar company with a crushing sugar capacity of 77500 TCD, a distillery capacity of 560 KLD and a co-generation capacity of 175.7 MW. Balrampur Chini Mills Ltd is India’s largest and most efficient integrated sugar manufacturing firm. The company reported that as of December 31, 2020, its long-term debt-to-equity ratio was 0.17.
Sugar, Industrial Alcohol, Molasses, Ethanol, Power, and Bagasse are some of the company’s primary product/revenue segments. The company built a new distillery unit in 2020 to add 320 KLPD to the capacity of its existing distilleries, bringing the total capacity to 840 KLPD.The Balrampur Chini share price at the time of writing is Rs.349.50, and its market capitalization stands at Rs. 7131.20 crore.
Although the market has shown a downward trend, however, Balrampur Chini has shown positive results:
- To increase sugarcane yields and recovery, the corporation aims to replace the Co-0238 sugarcane variety in its catchment region with newer types.
- Balrampur Chini could increase its ethanol capacity 2x to Rs. 35 crore liters with distillery Capex. Distillery sales are expected to witness 47.1% CAGR to Rs. 2109.5 crores in FY22-24E, which would be 35% of total revenues.
- At some plants, it is undergoing modernization and de-bottlenecking. By FY24, this would result in increased sugarcane crushing and improved recoveries. In FY22-24E, we anticipate an 11.9% CAGR in sales.
- The company has a lower debt.
- Book value per share has increased in the last two years.
- Also, the company has zero promoter pledges.
The industry stands out in the sector with the rise of ethanol production, which promises a robust increase in revenue & unwavering profitability, which would entail a higher payment return. According to the corporation, the long-term debt-to-equity ratio was 0.17 as of December 31, 2020.
The company has received an A1 rating for its Rs. 685 million non-fund-based limits and a high credit quality LA rating from the rating agency ICRA for its Rs. 8.41 billion long-term debt program and Rs. 6.2 billion fund-based bank limits. Sugar stocks have surged as the price of ethanol used for blending purposes may rise. This will also show on the Balrampur Chini share price and may lead to a price rise.
The investor can consider buying the share as it is expected to increase a 40.1% CAGR in distillery volume, which would grow the company’s earnings by 28% CAGR during FY22-24.
Conclusion
For an investor, it is essential to focus on all the scenarios before investing in a stock. Balrampur Chini can be considered a buying option after contemplating all the factors.
