Multibagger Alert: Investment of Rs 1 lakh in this sugar stock last year would have turned to Rs 2.28 lakh today! Should you invest now?

The company’s stock price went from Rs 149.15 on 12 November 2020 to Rs 340.1 (as of 11 November 2021). It touched a 52-week high of Rs 398.25 on 18 October 2021.

Balrampur Chini Mills Limited, an integrated sugar manufacturing company engaged in the manufacturing of sugar, ethanol and power, has turned into a multibagger by delivering returns of 128% in the last one year.

The company operates in the segments of sugar, distillery, co-generation and others. Its allied business comprises manufacturing and marketing of ethyl alcohol and ethanol, generation and selling of power, and manufacturing and marketing of organic manure. Its products include molasses and bagasse.

Industry dynamics-

• Owing to factors like GDP growth, rising disposable income, increasing demand for processed foods etc., sugar consumption in India is expected to grow.

• Furthermore, prudent government policies, rational cane pricing, setting standard floor prices for sugar by way of MSP, robust ethanol blending program, are other factors that will drive the growth of the sugar industry in India.

Financial highlights-

In Q2FY22, on a consolidated basis, the company’s net revenue stood at Rs 1213.83 crore. It's PBIDT (ex OI) came in at Rs 134.85 crore, an increase of 5.56% YoY, with a corresponding margin expansion of 121 bps. PBIDT (ex OI) margin for the quarter stood at 11.11 per cent. The bottom line of the company increased by 9.67% YoY to Rs 81.12 crore, whereas its corresponding margin stood at 6.68%, representing a YoY expansion of 95 bps. 

Capex and expansion plans-

The company has a strong emphasis on growth through ethanol expansion. It is currently undertaking greenfield/brownfield expansion for a distillery at Maizapur, Balrampur and Gularia. The company is in the process of modernizing and upgrading its sugar factories, which is expected to come on stream from November 2022. Moreover, it is installing incineration boilers as part of the proposed distillery expansion, the surplus power from which can be exported to the grid on finalization of PPA. Speaking about the capex plans for the next year, the capex estimates stand at Rs 363 crore. Of this, the company plans to borrow Rs 140 crore from banks, and the rest shall be procured from internal accruals.

At 3.02 pm, the share price of Balrampur Chini Mills Limited was trading at Rs 341.4, an increase of 0.38% from the previous day’s closing price of Rs 340.1 on BSE.