Sugar stocks in demand: Balrampur, EID Parry, Dwarikesh hit 52-week high

Shares of sugar companies were in demand on Tuesday with Balrampur Chini Mills, EID Parry (India) and Dwarikesh Sugar Industries hitting their respective 52-week highs on the BSE. The sugar companies are expected to report a strong operational performance, driven by higher sugar realizations and lower costs.

Balrampur Chini Mills rallied 7 per cent to Rs 194 on the BSE in early morning trade today, and was trading at its highest level since May 2006. It had hit an all-time high of Rs 205 on April 2006.

Meanwhile, Dwarikesh Sugar Industries soared 9 per cent to Rs 42, and EID Parry (India) gained 5 per cent to Rs 235 on the BSE in intra-day trade. Dalmia Bharat Sugar and Industries, Mawana Sugars, Rajshree Sugars & Chemicals, Magadh Sugar & Energy, Ugar Sugar Works, Uttam Sugar and Dhampur Sugar Mills were up in the range of 5 per cent to 9 per cent. In comparison, the S&P BSE Sensex was up 1 per cent at 41,110 level.

As per the Indian Sugar Mills Association (ISMA), sugar production in India fell by 30.2 per cent to 7.8 million tonnes during the first quarter of the October 2019- September 2020 sugar season (SS), as compared to 11.2 million tonnes of sugar produced during the same period last year, due to lower cane acreage in some parts of the country. ISMA says the industry has till-date contracted for around 2.5 million tonne (MT) of sugar for exports.

“So, while the sugar inventory in India remains high, the demand-supply scenario is expected to be more balanced going forward. This, combined with various initiatives such as incentives on exports recently announced, will lead to an overall improved operating environment in the coming quarters,” the management of Balrampur Chini Mills had said while announcing September quarter results.

Looking at the high sugar deficit of around 6.0 MT in the global market, and the subsequent increase in sugar prices to 13 cents per pound, analysts at Elara Capital expect the industry to sign more contracts in the upcoming months.

"Out of the 6.0 MT of exports quota set by the government, we expect the industry to at least ship 5.0-5.5 MT by the end of the season," the brokerage firm said in a note.

Besides, analysts at Care Ratings, expect sugar prices to remain stable and be in the range of Rs 34 per kg to Rs 35 per kg stable in the coming months.

"We expect sugar output during SS 2019-20 to fall by 21.5 per cent. The movement in domestic sugar prices will also depend on the pace of exports during the year," it added.