Sugar stocks have been on the rise lately. Sugar stocks have rallied up to 40% in the last one month. Analysts see optimism returning in the sugar sector, thanks to Seasonal factors: Growing concerns on India's sugar production estimate for the upcoming season; Sugar price rise globally, State Advised Price (SAP) for sugarcane, and Ethanol momentum being firmly on an upward trajectory
Major sugar stocks, including Balrampur Chini Mills, Dalmia Bharat Sugar, Triveni Engineering and Dwarikesh Sugar jumped as much as 12% on Thursday after a dry August month prompted officials to cut Maharashtra state output forecast by 14% in 2023/24 crop year to the lowest in four years which is likely to push prices higher
Sugar stocks have also seen positive movement since Prime Minister Narendra Modi announced the Global Biofuels Alliance (GBA) at the G20 Summit 2023, which will accelerate sustainable biofuel deployment and support the global energy transition. According to share market analysts, since India is the second largest producer of sugar, after Brazil, the Indian sugar industry stands to gain from the decision to increase ethanol blending with petroleum products
In the last one month, Balrampur Chini Mills share price has jumped around 10%, Magadh Sugar & Energy (up 40%), Dalmia Bharat Sugar (up 33%), Triveni Engineering (up 31%), Sakthi Sugars (up 36%), Uttam Sugar Mills (up 26%), K M Sugar Mills (up 8%), Dhampur Sugar Mills (up 19%), and Mawana Sugars (up 13%)
Sugar prices have gone up by around 3%-4% during the last one month, and the prospects for sugar companies have improved. Sugar stocks including Balrampur Chini Mills, Dalmia Bharat Sugar and Triveni Engineering, Sakthi Sugars, Uttam Sugar Mills, KM Sugar Mills, Dhampur Sugar Mills, Mawana Sugars hit their 52-week high this month
Broking firm DAM Capital initiated coverage on sugar stocks, with a ‘buy’ rating on Balrampur Chini Mills Ltd, Triveni Engineering Industries Ltd, Dalmia Sugar and Dwarikesh Sugar stocks. It projected strong growth for the sugar companies on the back of expected higher prices. The analysts at the brokerage project potential gains of up to 29% in sugar stocks in the next 12 months
DAM Capital in a note said that fast-developing El Nino conditions are expected to further hamper sugar production in key sugar-growing states and keep domestic sugar prices above Rs 37 per kg. “This would benefit Uttar Pradesh-based sugar companies with higher sustainable sugar volume and higher sugar realization. Expect sugar companies to witness strong earnings growth for FY23-26E,” the brokerage stated
As per DAM Capital, Amid the fall in production, India is unlikely to export any sugar. Moreover, export from Thailand is also likely to come down due to the expected lower production. This is expected to result in a surge in global sugar prices. "Given the strong earnings growth on the back of higher sugar prices and an increase in ethanol volumes owing to the completion of a large distillery capacity expansion, DAM believes valuations are attractive at current multiples," it said
Religare Broking expects sugar stocks to see fresh upward momentum ahead and has recommended buying four stocks that are trading from Rs 50 to Rs 550 currently. The brokerage firm took into consideration the Equal Weighted Index of Sugar stocks and noted that it has witnessed a breakout from downsloping resistance trendline and is trading well above its key moving averages, adding to the positivity
Analysts at Religare Broking believe that overall, sugar stocks are likely to attract fresh upward momentum and perform well in the medium term. Technically, their preferred picks are Shree Renuka Sugars, EID Parry, Balram Chini Mills and Triveni Engineering. These four companies are the top four sugar stocks in terms of market share
Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today. Investors should consult their financial advisors before taking any position