3 Undervalued Sugar Stocks to Watch

#2 Dalmia Bharat Sugar and Industries

Next on our list is the stock of Dalmia Bharat Sugar and Industries.

It's one of the fastest-growing companies in the Indian sugar industry. The company is a fully integrated player with 138 MW of cogeneration capacity and a distillery of 950 KLPD along with incineration boilers. It also has facilities for processing raw sugar.

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On the financial front the company's total revenue stood at Rs 6,980 m, a 17% YoY growth. Net profits of Dalmia Bharat Sugar were Rs 1,700 m, up 17%.

The net profits rose, despite lower cane crush and higher cost of production for sugar due to cane price increases in Maharashtra and Uttar Pradesh.

The performance was driven by higher sugar net sales realisation, increased volumes from grain-based distilleries, and the upward revision in power tariffs by UPERC.

Moving ahead, the Board has approved the installation of 13 TPD Compressed Bio Gas project at the Kolhapur plant with expected commissioning by November 2026.

The company is also undertaking capital expenditure for the installation of steam-saving equipment at the Jawaharpur plant. This initiative is expected to reduce steam consumption by approximately 10%, resulting in significant bagasse savings.

The long-term prospects of Dalmia Bharat Sugar and Industries depend largely on India's ethanol policy, sugar price cycles, and diversification into bio-energy.

#3 Magadh Sugar and Energy

Next on our list is Magadh Sugar and Energy. The company's core business includes Sugar, Ethanol and Co-Generation.

The company has 3 sugar mills with a combined crushing capacity of 21,500 TCD. It also has two distillers with a total capacity of 155 KLPD and a co-generation facility to generate 38 MW power.

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On the financial front the company's total revenue stood at Rs 2,964 m vs Rs 2,838 m YoY. Net profits of Magadh Sugar and Energy were Rs 251 m vs Rs 211 m YoY.

Revenue for the quarter has increased, driven by higher realisation from sugar sales and higher quantities of sugar sold, despite a decline in ethanol sales volume.

EBITDA and PAT for the quarter increased 23% and 19%, respectively, driven by higher realisation from sugar sales. Sugar realization for the quarter increased 7%, while for the nine-month period, it improved 6%.

For 2025-26 crushing season, the State Advisory Price (SAP) of sugarcane in Bihar had been increased by Rs 15 per quintal, raising the price to Rs 380 per quintal for early-maturing varieties and Rs 360 per quintal for general varieties, reflecting an over 4% rise compared to the previous season.

This has partially mitigated the impact of increase in sugarcane price.

Government policy will continue to drive industry direction. Export quotas, Minimum Selling Price (MSP) of sugar, ethanol pricing, and stock limits remain key variables influencing profitability and cash flows.

Conclusion

Investing in sugar stocks can be attractive during favourable cycles, especially when sugar prices rise or when ethanol demand grows due to government blending policies.

Companies diversifying into ethanol and power generation can stabilise earnings.

However, the sector is highly cyclical and heavily influenced by government policies.

Investors should therefore focus strongly on fundamentals such as balance sheet strength, ethanol capacity, debt levels, and operating efficiency.

Well-managed companies with integrated operations and strong cash flows are better positioned to withstand sugar price volatility and policy changes over the long term.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...