X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Balrampur Chini: Sugarcane turns bitter - Views on News from Equitymaster
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Balrampur Chini: Sugarcane turns bitter
Jun 16, 2010

Balrampur Chini Mills Limited has announced its 2QFY10 results. The company has reported a 32% YoY growth in sales and a 58% YoY fall in net profits. Here is our analysis of the results.

Performance summary
  • Sales grew by 32% YoY during 2QFY10 (fiscal year ends September). This strong growth comes on the back of higher sugar realisation during the quarter.
  • Operating (EBITDA) margins fell by 19.4% during the quarter to stand at 17.3%. This was due to a sharp rise in raw material costs during the quarter.
  • Net profit fell by 58% YoY during the quarter on the back of lower operating income and higher effective tax rate.
  • Net profit during 1HFY10 declined 11% YoY, again due to lower operating profit and higher effective tax rate.


(Rs m) 2QFY09 2QFY10 (%) Change 1HFY09 1HFY10 (%) Change
Net sales 3,571 4,705 31.8% 7,866 9,100 15.7%
Expenditure 2,260 3,891 72.2% 5,397 6,969 29.1%
Operating profit (EBDITA) 1,312    814 -37.9% 2,469 2,131 -13.7%
EBDITA margin (%) 36.7% 17.3%   31.4% 23.4%  
Other income    2    7 208.7%    8  27 252.6%
Interest    299    219 -27.0%    549    392 -28.6%
Depreciation    267    265 -0.7%    542    534 -1.5%
Profit before tax    748    338 -54.8% 1,386 1,232 -11.1%
Tax  86  62 -27.3%    211    191 -9.3%
Profit after tax/(loss)    662    276 -58.4% 1,175 1,041 -11.4%
Net profit margin (%) 18.5% 5.9%   14.9% 11.4%  
No. of shares (m)       256.8 255.5  
Diluted earnings per share (Rs)*         8.3  
Price to earnings ratio (x)*         9.7  
* 12 month trailing earnings

What has driven performance in 2QFY10?
  • BCML witnessed an increase in topline this quarter due higher sugar sales. Revenue from the sugar business, which contributes 76% to overall sales, increased by 43% YoY during the quarter. This was on the back of higher realisation, which increased by Rs 12 per kg to stand at Rs 32.3 per kg during the quarter. Sugar volumes declined by 9% to 1.1 m quintal in the same period. The distillery business which contributes 7% of total sales fell by 13% YoY. Volumes for the same declined by 15% YoY. The company however, witnessed a growth of 23% YoY in its power generation business which contributes 17% to total sales.

    Segment wise performance
    (Rs m) 2QFY09 2QFY10 % Change 1HFY09 1HFY10 % Change
    Sugar 2,939 4,205 43.1% 6,730 8,270 22.9%
    % of total revenues 71.3% 76.3%   76.4% 81.2%  
    EBIT % 21.3% 1.8%   18.3% 11.3%  
    Distillery 413 362 -12.6% 745 461 -38.1%
    % of total revenues 10.0% 6.6%   8.5% 4.5%  
    EBIT % 36.6% 37.1%   40.2% 31.8%  
    Cogeneration 758 933 23.0% 1,315 1,442 9.6%
    % of total revenues 18.4% 16.9%   14.9% 14.1%  
    EBIT % 56.6% 43.8%   51.4% 45.3%  
    Organic manure 9 9 1.1% 17 16 -10.3%
    % of total revenues 0.2% 0.2%   0.2% 0.2%  
    EBIT % -4.6% 27.3%   8.0% -2.6%  
    Total revenues 4,119 5,509 33.7% 8,807 10,189 15.7%

  • Operating margins fell during the quarter. This was due to increase in raw material costs by 110% and increase in staff costs by 21%. The fall could have been sharper but for a 6% decline in other expenditure.

  • On the EBIT front, margins for the sugar segment fell by 19.5% to 1.8%. This came on the back of higher price of sugarcane coupled lower levy sugar prices. EBIT margins for the distillery segment were marginally higher as a result of average realisation improving by 3% to Rs. 25.9 per litre. Cogeneration segment recorded a fall of 12.8% in EBIT margins due to higher raw material costs.

  • BCML’s net profits fell during the quarter. This was on the back of lower operating income and increase in effective tax rate.

What to expect?
At a price of Rs 81, the stock is trading at 9.7 times its trailing 12-month earnings. The company is expecting demand for sugar to increase which would give it room to grow. It is also bullish on the distillery business as the government has decided to blend fuel with 5% ethanol. In fact, this is expected to move up to 10% in future. During the quarter, BCML completed the conversion of one of its boilers to multi-feed and expects to complete the conversion of the second boiler this quarter. This would help the company produce power even in the off-season. On the down side, the sugarcane crop this season has been higher than expected due to better yield per hectare. This is expected to put pressure on prices in the medium term. While the company is seeing several triggers for long term growth, we believe that growth for the medium term is already priced in. For this we would advise investors to be cautious towards the stock.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

BALRAMPUR CHINI SHARE PRICE


Feb 21, 2018 (Close)

TRACK BALRAMPUR CHINI

  • Track your investment in BALRAMPUR CHINI with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MORE ON BALRAMPUR CHINI

BALRAMPUR CHINI 8-QTR ANALYSIS

COMPARE BALRAMPUR CHINI WITH

MARKET STATS