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Balrampur Chini: Time to cheer?

Aug 13, 2008

Performance summary
  • Topline declines by 13% YoY and 4% YoY in 3QFY08 and 9mFY08 respectively on account of decline in volumes primarily witnessed in the sugar segment.
  • Operating margins for 3QFY08 are at 26% (-5% in 3QFY07). For 9mFY08, the margins improved by 15% over 3QFY07 to 24%. However, the accounting for sugarcane prices for the season 2007-08 is subject to change pursuant to the order of the apex court.
  • Reports net profits as compared to losses in the corresponding periods of FY07 on account of higher operating profits.

Rs(m) 3QFY07 3QFY08 (%) Change 9mFY07 9mFY08 (%) Change
Net sales 3,653 3,163 -13.4% 10,993 10,518 -4.3%
Expenditure 3,817 2,328 -39.0% 10,083 8,037 -20.3%
Operating profit (EBDITA) (164) 836   910 2,482 172.7%
EBDITA margin (%) -4.5% 26.4%   8.3% 23.6%  
Other income 18 6 -67.8% 56 87 54.8%
Interest 207 249 20.2% 413 613 48.6%
Depreciation 205 330 61.0% 570 884 55.1%
Profit before tax (559) 262   (16) 1,072  
Tax -86 93 -208.7% 66 247.6 278.0%
Profit after tax/(loss) (473) 169   (82) 824  
Net profit margin (%) -13.0% 5.3%   -0.7% 7.8%  
No. of shares (m) 248.2 255.5   248.2 255.5  
Diluted earnings per share (Rs)*         1.9  
Price to earnings ratio (x)*         49.8  
* 12 month trailing earnings

What has driven performance in 9mFY08?
  • Balrampur Chini reported a 13% YoY and 4% YoY decline in sales for 3QFY08 and 9mFY08 respectively. Revenues were lower on account of decline in volumes primarily witnessed in the sugar segment although allied businesses continued to perform well. The sugar segment reported decline in sales on account of lower production led by lower sugarcane availability. The company crushed 7.9 m quintals of sugar cane as compared to 22 m quintals, producing 61% YoY less sugar this quarter (0.8 1 m quintals). Average sugar realisation for the quarter under review, however, improved marginally to Rs.14.87 per kg (Rs 13.4 per kg in 3QFY07).

    Segment wise performance
    Rs m 3QFY07 3QFY08 (%) Change 9mFY07 9mFY08 (%) Change
    Sugar 3,043 2,361 -22.4% 9,607 8,569 -10.8%
    % of total revenues 74.3% 66.7%   77.6% 70.8%  
    Distillery 534 564 5.6% 1,198 1,412 17.8%
    % of total revenues 13.0% 15.9%   9.7% 11.7%  
    Cogeneration 519 612 17.9% 1,559 2,115 35.7%
    % of total revenues 12.7% 17.3%   12.6% 17.5%  
    Others 2 4 120.0% 18 14 -21.7%
    % of total revenues 0.0% 0.1%   0.1% 0.1%  
    Total revenues 4,098 3,541   12,381 12,109  

  • While the distillery reported a 6% YoY growth, power segment grew by 18% YoY in 3QFY08. Higher sales volumes and better realisations (average realisations in the quarter and nine months under review stood at Rs. 20.3 and Rs. 19.7 per litre) drove up the distillery sales. Enhancement of overall saleable power production capacity led to strong revenues in the power segment.

  • The improvement in operating margin was mainly due to decrease in the cost of sugarcane. During the nine months period ended June 30, 2008 the company has accounted for sugarcane purchases for the season 2007-08 at the rate of Rs 110 per quintal pursuant to the interim order of the Allahabad High Court. However, the final decision of the Supreme court is still pending and any liability in this respect will have to be accounted for. Hence, if the cane prices are fixed higher than what the company has accounted for, the margins will come under pressure.

  • On the segmental PBIT front, distillery and power segments continued to deliver a robust operating performance on account of higher sales volumes and better realisations. The sugar segment witnessed positive PBIT margins on account of decreased cost of sugarcane and improved average sugar recoveries. Sugar recoveries for the quarter and nine months under review has improved and stood at 10.23% and 10.16% respectively.

  • The company reported net profits as compared to losses in the last corresponding periods on account of operating profits. Depreciation was higher on account of expanded capacities.

What to expect?
At the current price of Rs 95, Balrampur Chini is trading at a multiple of 49.8 times its trailing 12-month earnings. The company presently has an aggregate sugarcane crushing capacity of 73,500 TCD, distillery and cogeneration operations of 320 KLPD and 126 MW (Saleable) respectively. It has not lined up any further capex for the coming fiscal. The performance in this quarter was better on account of capacity expansions and some improvement witnessed in realisations. Going forward, although the management is hopeful of strong performance on account of improving sector scenario and its integrated business model, the raw material prices continue to be the determining factor. Until there is clarity on the cane pricing issue, there will be an element of uncertainty with regard to the company’s future outlook.

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Aug 11, 2020 12:35 PM


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