Why Renuka Sugars Share Price is Rising

Ethanol, a renewable and eco-friendly biofuel, has gained prominence due to its potential in mitigating climate change and reducing dependence on fossil fuels.

Within this sector, penny stocks have emerged as intriguing investments.

Penny stocks are low-priced shares, typically trading below Rs 100 per share or even Rs 50 per share.

One such ethanol penny stock that's in focus this week is Shree Renuka Sugars.

Shares of Shree Renuka Sugars surged over 6% in yesterday's trading session.

Here's why...

Why Shree Renuka Sugars Share Price is Rising

# Ethanol Boost

The recent rally in shares of Shree Renuka Sugars comes after reports emerged saying the Indian government may divert more sugar to produce ethanol.

Not just Renuka, but most of the sugar companies saw their stocks rise in value.

A Bloomberg report citing sources said that the government is considering a proposal that will permit factories to use extra 800,000 tons of sugar for biofuel this year due to the crop being higher than earlier prediction.

The move is expected to benefit the sugar mills and ethanol distilleries in the country.

It would also support global sugar prices which have fallen in April 2024.

In December last year, the government gave a shocker to ethanol companies by putting curbs on ethanol production from sugar due to sugar shortage in the domestic market caused by erratic monsoon.

But now, the potential move to divert more sugar to produce ethanol might help India reach its target of 20% blending of ethanol with transport fuel by 2025.

Global Numbers Aid to the Positive Sentiment

Recently, the US Energy Information Administration reported that supply of ethanol has shot up, hitting 26.416 million barrels, 324,000 above the week before and 1.28 million more than a year ago.

This comes after net inputs of ethanol purchased by refiners and blenders jumped its largest volume this year, while the volume of gasoline supplied to the market was at a 21-week high.

Shree Renuka Sugars is a leading supplier of ethanol to oil marketing companies in India, so we might see a bump in its supply numbers in the coming quarters.

What Next for Shree Renuka Sugars?

Shree Renuka Sugars, which is a subsidiary of Singapore-based Wilmar Sugar Holdings, is one the largest sugar and ethanol producers.

After several years of losses, the country's largest sugar producer became profitable last year, aided by several government incentives linked to ethanol blending and exports.

Financial Snapshot

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Net Sales	45,081	48,812	56,485	64,326	90,207
Growth (%)	-28%	8%	16%	14%	40%
Operating Profit	5,059	782	6,410	4,620	6,495
OPM (%)	11%	2%	11%	7%	7%
Net Profit	-14,484	20,992	-1,148	-1,385	-1,970
Net Margin (%)	-32%	43%	-2%	-2%	-2%
ROE (%)	0.0	0.0	0.0	0.0	0.0
ROCE (%)	10.2	0.0	22.2	8.1	11.7
Dividend (Rs)	0.0	0.0	0.0	0.0	0.0
Debt to Equity (x)	-0.7	-1.6	-2.7	-2.9	-2.8

Data Source: Ace Equity

Throughout last few quarters, the company has reduced current liabilities, thereby reducing the amount of borrowing from suppliers or short-term creditors.

Recently, the company received approval from its board of directors to raise up to Rs 25 bn via QIP.

For the first nine months of FY24, Shree Renuka Sugars' net revenue showed an 18% growth, driven by improved realisations across all segments.

The company is also strategically important to its parent, as Shree Renuka Sugars' accounts for around 20% of the parent company's total sugar capacity.

The company is currently amalgamating 4 of its subsidiaries with itself to simplify the group structure, subject to regulatory approvals.

Last year, the company had also acquired a 100% stake in Anamika Sugar Mills. This acquisition is expected to help Shree Renuka establish its presence in Uttar Pradesh, one of the largest sugar producing states, and to cater to the markets of North and East India.

How Shree Renuka Sugars Share Price has Performed Recently

In the past 5 trading sessions, Shree Renuka Sugars share price is up around 7%.

In 2024 so far, the stock has underperformed benchmark indices and other peers by logging 4% losses.

Shree Renuka Sugars has a 52-week high of Rs 57 touched on 25 September 2023 and a 52-week low of Rs 39 touched on 14 March 2024.

In the past one year, shares of the sugar company have shown a flat performance.

Here's a table comparing Shree Renuka with its peers -

Comparative Analysis

Company	Renuka Sugar	Bajaj Hind. Sugar	Balrampur Chini	EID Parry	Triveni Eng
ROE (%)	0.0	-4.1	10.1	32.1	78.3
ROCE (%)	11.7	0.9	10.4	42.7	57.4
Latest EPS (Rs)	-2.2	-0.4	29.1	48.4	19.4
TTM PE (x)	0.0	0.0	13.6	12.6	17.4
TTM Price to book (x)	-3.9	1.0	2.5	1.6	2.6
Dividend yield (%)	0.0	0.0	0.6	1.6	0.9
Industry PE	16.1
Industry PB	2.4

Data Source: Ace Equity

About Shree Renuka Sugars

Shree Renuka Sugars is one of the leading sugar manufacturers in India with a track record of over 25 years.

Its operations are integrated, encompassing crushing of cane, refining of raw sugar, ethanol production and power generation.

To know more, check out Shree Renuka Sugars financial factsheet and its latest quarterly results.

Happy Investing!

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...