maverick
29-04-2008, 07:00 AM
Prices of sugar scrips have been on a rise ever since industry majors started reporting strong fourth quarterly figures.
The latest to join the band-wagon was Triveni Engineering which posted a growth of 534.81 per cent in net profit to Rs 34.28 crore for the quarter ended March 2008 compared with Rs 5.40 crore in the same quarter previous year. Total income increased 4.74 per cent to Rs 382.83 crore for the Jan-Mar quarter against Rs 365.49 crore for the corresponding quarter of last year.
Analysts say the turnaround story in these companies is more due to secondary businesses like power generation and distilleries than any fundamental change in the core sugar business.
“Volume as well as high margin growth in co-generation and distilleries business has improved the profitability. This will also provide stability to revenues going forward,” said Nirav Shah, sector analyst, PINC.
At a time when the companies are increasing generation capacity to meet the power needs, realisations in sugar prices have increased giving a fillip to bottomline.
“Realisations are higher, varying between Rs 13-15/kg in different regions. There are reports that production will be lower in FY09, hence buying is being seen. Investors are buying with a positive view on the future outlook of the sector,” said Vikram Suryavanshi, Karvy Stock Broking.
He is of the opinion that sugar cycle will change by the end of 2008-09 and early 2010.
“At current levels, financial numbers do not support valuations. In near term the sector will under-perform and won’t put any call on the stocks at current market price,” he added.
However, Shah is positive on stocks like Triveni Engineering and Balrampur Chini Mills. “Investors will benefit from the diversified businesses these companies are into and an upside in sugar prices will further strengthen the bottomline,” he added.
The latest to join the band-wagon was Triveni Engineering which posted a growth of 534.81 per cent in net profit to Rs 34.28 crore for the quarter ended March 2008 compared with Rs 5.40 crore in the same quarter previous year. Total income increased 4.74 per cent to Rs 382.83 crore for the Jan-Mar quarter against Rs 365.49 crore for the corresponding quarter of last year.
Analysts say the turnaround story in these companies is more due to secondary businesses like power generation and distilleries than any fundamental change in the core sugar business.
“Volume as well as high margin growth in co-generation and distilleries business has improved the profitability. This will also provide stability to revenues going forward,” said Nirav Shah, sector analyst, PINC.
At a time when the companies are increasing generation capacity to meet the power needs, realisations in sugar prices have increased giving a fillip to bottomline.
“Realisations are higher, varying between Rs 13-15/kg in different regions. There are reports that production will be lower in FY09, hence buying is being seen. Investors are buying with a positive view on the future outlook of the sector,” said Vikram Suryavanshi, Karvy Stock Broking.
He is of the opinion that sugar cycle will change by the end of 2008-09 and early 2010.
“At current levels, financial numbers do not support valuations. In near term the sector will under-perform and won’t put any call on the stocks at current market price,” he added.
However, Shah is positive on stocks like Triveni Engineering and Balrampur Chini Mills. “Investors will benefit from the diversified businesses these companies are into and an upside in sugar prices will further strengthen the bottomline,” he added.