Archive for the 'Sugar' Category

Sugar Matrix – UP mills have still not commenced crushing

October 22, 2008

Friends,

Sugar mills is UP have still not commenced crushing and are fighting the govt against raising of cane price to 140/- per qtl. An un-named executive of ‘Bajajhind’ says that it will add Rs 350 to 390 crs to the costs this year but he also confirms that the profitability can still be there due to higher sugar prices this year. Sugar production is estimated to be 22 M/Ts against 26.5 M/Ts last year.

At 9 pc recovery the sugar will cost mills at around Rs 1600/qtl (Rs 300 to 325 per qtl cost is recovered by sale of press-mud,molasses and co-generation power. All leading mills have distilleries and co-generation facilities. Maharashtra does not face cane pricing problems because there sugar co-operatives and farmers are owning the mills as members of Co-operative societies.

Softening of interest rates will be of benefit to sugar industry as it has to carry stock till sold through the monthly releases by govt. The levy portion is just 10 pc now and the mills make huge profits in years of high sugar prices. This happens to be such year only. The world sugar prices are sideways but costly dollar is good defence. Last year India exported 4.5 M/T sugar.

If the inflation would not have come down, the govt would have been very concerned about the rising sugar prices but this situation is narrowly saved for industry. Sugar industry profitability is complex due to volatility of sugar prices and interest rates and production variation adds further dimension to it. Mills do not have capacity to vary production because the cane in their procurement area has to be crushed by them. Every aspect of it can be made manageable but the politicians do not allow it and keep powers with them while a sugar board representing all sides who have interest may easily do the job and in a more amicable manner.

Sugar is a capital intensive industry. It has to be operating at the most optimum level of operation. Courts are already having to intervene in sugar related cases.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – Fall of US market by 36 pc and UK market by 39 pc over the year

October 20, 2008

Friends,

In the aftermath of the second week of bad performance by all world markets, there is loss of thinking power to some extent for the logic is being defied by the fear psychosis in the thinking space of mind. Let us recount some of the facts of the day.

The UP govt has declared SAP (state advised price) for sugar cane for this season as 140 rupees/qtl (up Rs 15). This should be digestible rate for the mills because the sugar rates this season are pretty high and would remain so because the sugarcane production this year is going to be only 120 m/t against 160 m/t in previous year. The unorganised sector is already offering price of cane purchase nearly at the level of SAP or more. There are 132 sugar mills in UP which were operational last year. There will be fierce fighting amongst some of the leading ones to have greater share of cane-crop although there are some rules specifying the area for each mill. The industry would be back in black, and there is no doubt. You should buy your sugar scrip before its too late (please refer to my earlier posts).

Those involved in the accident seem to be hurt less than the bystanders otherwise how would one justify fall of US market by 36 pc and UK market by 39 pc over the year while Japan losing 48 pc and emerging Asian markets losing close to 55 pc. The reverse is going to happen, today or tomorrow. Asian stock will out perform the other markets. I told you earlier and say it again with supporting numbers.

Asian markets performed poorly (26 pc) over the last week while the UK and US markets went up by 3 pc and 4 pc. Shouldn’t therefore markets in India be better this week after losing more than 50 pc from peak. The RBI will have a formal occasion to bring back cheap money policy because loss of jobs and lower economic activity are worse than some extra dose of inflation. As I have been telling time and again, it is utmost necessary to let unearned incomes go down in value but the earned income can not be given a worse treatment. The pensioners too can only share, in whatever proportion, when there is going to be production. The whole economic tension the world over is on account of this factor. Those who follow this site would recall that this analogy was put forth long back and is finding endorsement all this while.

Asian markets have been mixed this morning, may be India performs with some strong opinion favouring bulls.

The latest week did confirm that value buying is emerging as BSE Bankex went up by 4 pc and FMCG,Healthcare and Realty did not lose any further ground in the week gone by.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Good picks in Sugar,Cement and Steel sector

October 9, 2008

Friends,

Please have a look at the financial position of the following companies:

Bajajhind: 52 W High Rs 399 Low Rs 82

Capital Rs 14.14 crs Reserve Rs 1420 crs

Sales 07-08 Rs 1743 crs PAT Rs 45 crs
Sales 06-07 Rs 1486 crs PAT Rs 191 crs
Sales 05-06 Rs 900 crs PAT Rs 140 crs

Crushing capacity 100000 tonnes/per day (this will require Rs3500 crs
to put up today.)

Blarampurchini: 52 W High 127 Low 58

Capital Rs 24.82 crs Reserves Rs839 crs

Sales 06-07 Rs 1401 crs PAT Rs (-)42 crs
05-06 Rs 1905 crs PAT Rs 291 crs (18 months)
04-05 Rs 816 crs PAT Rs 125 crs

Capacity 70000 tonnes/per day (present cost Rs 2300 crs )

(Sugar prices have improved to Rs18/kg in four month from Rs14/kg ,
new sugar season will commence in a month)
Prismcement: 52 W High 79 Low 21

Capital Rs 298 crs Reserves Rs 319 crs

Sales 07-08 Rs 892 crs PAT Rs 241 crs
06-07 Rs 771 crs PAT Rs 192 crs
05-06 Rs 573 crs PAT Rs 62 crs

Birlacorpn : 52 W High 385 Low 108

Capital Rs 77 crs Reserves 919 crs

Sales 07-08 Rs 1763 crs PAT Rs 393 crs
06-07 Rs 1593 crs PAT Rs 326 crs
05-06 Rs 1228 crs PAT Rs 125 crs

Ultratechcement : 52 W High 1165 Low 442

Capital Rs 124.49 crs Reserves Rs 2572 crs

Sales 07-08 Rs 5609 crs PAT Rs 1006 crs
06-07 Rs 4972 crs PAT Rs 1166 crs
05-06 Rs 3336 crs PAT Rs 229 crs

SAIL : 52 W High 293 Low 108

Capital Rs 4130 crs Reserves Rs 18933 crs

Sales 07-08 Rs 41517 crs PAT Rs 7536 crs
06-07 Rs 35865 crs PAT Rs 6202 crs
05-06 Rs 29311 crs PAT Rs 4012 crs

All these companies are old and established companies and are leaders in their field. They are highly traded and liquid companies, have FII holding, have good managements, good plant locations and are nearly at their low points due to aggressive FII liquidation. From these angles they should be recovering fast. Their product demand will never go down, they will not face competition from outside, new players will
have much higher cost of production, they have very less of borrowing and have increased capacities out of own generated funds and are low cost producer with assured raw-material sources.

I hope you will find above informative and convincing.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Good picks in Sugar,Cement and Steel sector

October 7, 2008

Friends,

Please have a look at the financial position of the following companies:

Bajajhind: 52 W High Rs 399 Low Rs 82

Capital Rs 14.14 crs Reserve Rs 1420 crs

Sales 07-08 Rs 1743 crs PAT Rs 45 crs
Sales 06-07 Rs 1486 crs PAT Rs 191 crs
Sales 05-06 Rs 900 crs PAT Rs 140 crs

Crushing capacity 100000 tonnes/per day (this will require Rs3500 crs
to put up today.)

Blarampurchini: 52 W High 127 Low 58

Capital Rs 24.82 crs Reserves Rs839 crs

Sales 06-07 Rs 1401 crs PAT Rs (-)42 crs
05-06 Rs 1905 crs PAT Rs 291 crs (18 months)
04-05 Rs 816 crs PAT Rs 125 crs

Capacity 70000 tonnes/per day (present cost Rs 2300 crs )

(Sugar prices have improved to Rs18/kg in four month from Rs14/kg ,
new sugar season will commence in a month)
Prismcement: 52 W High 79 Low 21

Capital Rs 298 crs Reserves Rs 319 crs

Sales 07-08 Rs 892 crs PAT Rs 241 crs
06-07 Rs 771 crs PAT Rs 192 crs
05-06 Rs 573 crs PAT Rs 62 crs

Birlacorpn : 52 W High 385 Low 108

Capital Rs 77 crs Reserves 919 crs

Sales 07-08 Rs 1763 crs PAT Rs 393 crs
06-07 Rs 1593 crs PAT Rs 326 crs
05-06 Rs 1228 crs PAT Rs 125 crs

Ultratechcement : 52 W High 1165 Low 442

Capital Rs 124.49 crs Reserves Rs 2572 crs

Sales 07-08 Rs 5609 crs PAT Rs 1006 crs
06-07 Rs 4972 crs PAT Rs 1166 crs
05-06 Rs 3336 crs PAT Rs 229 crs

SAIL : 52 W High 293 Low 108

Capital Rs 4130 crs Reserves Rs 18933 crs

Sales 07-08 Rs 41517 crs PAT Rs 7536 crs
06-07 Rs 35865 crs PAT Rs 6202 crs
05-06 Rs 29311 crs PAT Rs 4012 crs

All these companies are old and established companies and are leaders in their field. They are highly traded and liquid companies, have FII holding, have good managements, good plant locations and are nearly at their low points due to aggressive FII liquidation. From these angles they should be recovering fast. Their product demand will never go down, they will not face competition from outside, new players will
have much higher cost of production, they have very less of borrowing and have increased capacities out of own generated funds and are low cost producer with assured raw-material sources.

I hope you will find above informative and convincing.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Sugar Matrix – Favourable developments have taken place in this sector

October 5, 2008

Friends,

There has been lot of frenzied selling in market and the slowdown fears have been weighing heavily in the minds of investors. The the herd like behaviour, so common in times of confusion and expectation of change in tide, some times gives opportunity of once in a decade. You may have noticed the sugar scrips loosing values as much as the general fall and in some cases more than the general fall. There are some in this sector which have fallen less than the general fall. Characteristically, sugar scrips have low volumes and small capital bases and concentrated holding pattern which make movement larger than they have to. Its representatives have small capital base, have large reserves, big assets, high interest out flow and fluctuating prices of end product ie sugar while the raw material cost moves steadily up only. So, in a way it is prone to oscillating between the high profit and loss making periods.

Its cyclically has to be thoroughly understood along with developments like power co-generation and allowance of ethanol mixing with petrol which will impart some stability. The political sensitivity of sugar price comes in way of reaping wind-fall profits when there is opportunity. One noteworthy thing for this sector is that its members have been continuously putting up new plants and raising capacities. Also this sector now has been eyed by FIIs lately. The investors here have to enter when there is last leg of fall and the fortunes of industry have turned for better.

When there is generally weaker time in market coinciding what I explained above makes it a time when you can even put all your eggs in one basket. So now prepare for the action with confidence.

Now, please note what favourable developments have taken place in sugar sector but have not reflected in share prices. Firstly, the sugar prices have improved by 30 odd percent during last three months and would have given a respite to companies carrying stocks which is must as per the govt guidelines of releasing quota for sales on month to month basis.

Secondly, the cane price matter has been in SC and there has been some policy affecting guidelines in SC judgement orders which will limit the scope of govts irrationally fixing the price for cane. This is a welcome development for UP based mills.

Thirdly, there would be no more fresh capacities coming up for a long long time as the cost for putting a standard 6000 TCD plant comes to between Rs 200 to 250 crs. This capacity plant would generate a turnover of between Rs180 to 200 crs. By this yard stick the asset value for ‘bajajhind’ would come to Rs 3000 crs approx. (for its one lac tonne crushing capacity). Its t/o for the sugar year 2008-09 would be no less than Rs 2000 crs thereby reducing interest cost per unit of sale to 3 pc from 3.6 pc and depreciation cost per unit of sale to 7 pc from 8.3 pc.

Isn’t it wonderful that BH is selling at a point where its market cap. is just Rs 1420 crs and asset value is Rs 3000+ crs. The story is similar for others like ‘balramchin’, ‘oudhsugar’ and ‘dhampursug’ which have asset to market cap. of roughly 1.2,4.8 and 4.6 while ‘bajajhind’ has this ratio at 2.1.

The reserves to m/cap ratio is nearly same for ‘bajajhind’, ‘oudhsugar’ and ‘dhampursug’ but is slighly lower for ‘balramchin’. ‘balaramchin’ has some what better tradability and also reputation amongst the sugar companies. ‘balramchin’ and ‘bajajhind’ trading in F and O section also implying you may enter it while wait for selling other sector holdings at opportune time and exchange.

Should you have any queries please have no hesitation is asking.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market