Multibagger Stocks: Up over 270% in 2 Years! This Multibagger Sugar Stock Is Still in the Sweet Spot

The focus has been on Chinese stocks ever since the government announced various initiatives to keep the sector’s financial health healthy. The stock has delivered over 270 percent returns to its shareholders over the past two years. It touched a 52-week high of Rs 525.70 on April 8, 2022 and a 52-week low of Rs 297.80 on October 25, 2021.

With a market capitalization of over Rs 8,200 crore, the shares are trading above the short-term moving average of 10, 20, 200-DMA but below the 5, 50, 100-DMA. Long-term investors have made huge gains by investing in this stock as it has grown by over 700 percent in the last ten years.

In a recent report, CareEdge Research noted that a key factor for the sugar industry in India is the Ethanol Blended Petrol (EBP) program which aims to reduce the sugar surplus situation in India.

The EBP program supports diversion of sugarcane and surplus sugar to ethanol manufacturing which has now become a major focus point for the future of the sugar industry. The government also releases the purchase price for ethanol to divert sugarcane to ethanol production.

Centrum Broking believes that there has been a structural change in the dynamics of the industry. “Vatility in crude oil prices, environmental hazards from fossil fuel consumption and energy security concerns are being implemented by the Government of India (Government of India) as a result of the Ethanol Blending Program (EBP) being implemented,” it said.

The brokerage house mentioned that the demand for ethanol blending is estimated to reach 1,016 crore liters from the current 425 crore liters of ESY21-26, at a CAGR of 25.1 per cent. This is primarily driven by the sugar industry and has resulted in an expansion of TAM for integrated sugar mill owners from Rs 0.95 trillion in FY 2011-24 to Rs 1.4 trillion.

“Balrampur Chini Mills (BRCM) to benefit from expansion in distillery capacity from 560 KLPD at present to 1,050 KLPD in 2HFY23 and concurrent growth in addressable ethanol market (expected to almost double from Rs 240 billion in FY 2011-24 to Rs 450 billion in FY 2011-24) Ready,” highlights Centrum.broking.

“As BRCM turns to the bio-energy play, there will be steady growth and stability in earnings calling for higher valuation multiples. We begin coverage on BRCM with a ‘Buy’ rating and offer a PE of 14x ( Considering the change in quality of premium earning to LTA) ) to FY24E EPS reach a target price of Rs 36.8 and Rs 515.

Elara Capital also believes that ethanol capacity, refinery expansion plans and blockage of one of the facilities are on track. After the capital expenditure is completed, the distillation capacity will increase to 350 million litres; As a result, the EBIT contribution from the distillery is likely on a secular uptrend.

However, it highlighted that as more sugarcane is diverted to higher-margin ethanol, sugar volumes may stabilize with a downward bias, which could impact sugar revenues, but possibly the ethanol segment. This will be offset by better realization and higher profitability.

“We reiterate the buy on SOTP valuation with a lower target price of Rs 536 to Rs 506, which assumes sugar at 10x FY24E EV/EBIT and sugar at 7x FY24E EV/EBIT,” it added.

BRCM is a mid-cap company operating in the sugar sector. The major products/revenue segments include sugar, liquor (industrial), export promotion, power and bagasse.

Promoters held 42.42 per cent stake in the company as on March 31, 2022, while FIIs held 19.23 per cent, DIIs held 17.02 per cent.

(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of The Economic Times)