Buy This Multibagger Sugar Stock With A Target Price of Rs 600 In 1-Year

Balrampur Chini Mills Ltd is a mid-cap sugar company with a market capitalization of Rs 9,017.55 crore. The stock has risen 175.38 percent in a year and 19.08 percent on a YTD basis and 29.15 percent in the last six months, respectively. The brokerage company ICICI Securities has issued a buy call on this multi-bagger stock, with a target price of Rs 600. In a target period of 1-year, the brokerage believes that the stock will hit its target price from the current market price of Rs 445.60 as of 4 Feb, 11:22 am IST.

Q3FY22 results of Balrampur Chini Mill Mtd (BCML) according to the brokerage

• BCML reported a healthy set of numbers with 13% sales growth.
• Sales witnessed a growth of 13%YoY, aided by sugar & ethanol realisation.
• Earnings before interest, taxes, depreciation and amortization (EBITDA) were at Rs 99.8 crore, up 174.1% YoY, with margins at 8.2%.
• Consequent profit after tax (PAT) was at Rs 64.1 crore (up 138.4% YoY).

Key investment rationale for Balrampur Chini Mill Mtd (BCML) as per ICICI Securities

• With distillery capital expenditures (CAPEX), BCML would be able to increase its ethanol volumes 2.2x to 35 crore litre by FY24. Distillery sales to witness a 33.6% compound annual growth rate (CAGR) to Rs 1954.8 crore in FY21-24E, which would be 33% of total revenues.
• It is undertaking modernisation & de-bottlenecking at some plants. This would lead to higher sugarcane crushing, better recoveries by FY24. We expect a 7% revenue CAGR in FY21-24E.
• The company is introducing a newer sugarcane variety in its catchment areas, which would reduce the dependence on Co-0238.

Buy With A Target Price of Rs 600

ICICI Securities has said in a report that "BCML's share price has gone up 2.9x in the last five years (from Rs 153 in February 2017 to Rs 445 in February 2022). We expect a 2.2x increase in distillery volumes to boost earnings with a CAGR of 26.6% during FY21-24E. We continue to maintain our BUY rating on the stock. We value the stock at Rs 600, valuing the business at 18x FY23 PE."

With an alternative stock idea, the brokerage has also said "We also like Dwarikesh Sugar in our sugar coverage. The company is one of the most efficient companies with the highest sugar recovery & abundant sugarcane availability. It is increasing its distillery capacity to 3x in the next three years. We value the stock at Rs 135/share with a BUY recommendation."

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.