Anil Kumar Goel Sugar Stock Posts 36% Revenue Growth In Q1, Sharekhan Suggests Buy

A small-cap company that operates in the sugar industry is Dhampur Bio Organics. The largest pharmaceutical sugar factory in India is managed by Dhampur Bio Organics Ltd (DBOL). It is among the top plants for producing both raw and refined sugar. Following the release of the Q1 figures, the stock began trading on a higher note today.

Dhampur Bio Organics Financials

From Rs. 495.70 crores in Q1 FY23 to Rs. 676.26 crores in Q1 FY24, the company's revenue climbed by 36%. PBT climbed by 35% to 16.78 crores in the first quarter of FY24 from 12.40 crores in the same period of FY23, while PAT increased by 24% to 10.95 crores from 8.79 crores. EPS stood at Rs 1.65/share for Q1 FY24 as against Rs 1.32/share for Q1 FY23. The company raised the capacity of the units in Asmoli (9000 TCD to 12500 TCD) and Meerganj (5000 TCD to 9000 TCD) during the quarter. Both units are expected to be operational by October or November 23, and the installation dual feed greenfield distillery in Meerganj, with a capacity of 250,000 LPD (expandable up to 3,75,000 LPD) is anticipated to be operational by Q2 of FY26.

"Dhampur Bio Organics (DBOL) posted mixed numbers in Q1FY2024 with revenues growing by 43% y-o-y to Rs.709.5 crore, while a 88 bps y-o-y decline in the OPM led to 24% growth in the operating profit to Rs. 40.5 crore. PAT grew by 44% y-o-y with interest expenses staying lower by 7% y-o-y at Rs. 13.3 crore. Sugar business' sales grew by 14% y-o-y to Rs.488.6 crore. Sugar realisations grew 5% y-o-y at Rs.37.6 per kg. Biofuels & spirit business revenues grew by 2.25x y-o-y to Rs.296.4 crore. Higher transfer pricing affected margins of the biofuel segment which was down by 937 bps y-o-y to 6.2%. Country liquor sales during the quarter stood at Rs. 141.5 crore with sales volume of 5.9 lakh cases," said the brokerage firm Sharekhan.

"Revenues grew by 43% y-o-y to Rs.709.5 crore led by 14% y-o-y growth in the sugar division and 125% y-o-y growth in the biofuel & spirits division. Revenues came better than our expectation of Rs. 591.1 crore. Change in revenue mix resulted in 81 bps decline in the gross margins and 88BPS decline in the OPM to 5.7%. Sugar business EBIT margins were up by 160 bps to 4.6% while biofuel & spirits margins were down to 6.2% from 15.6% in Q1FY23 due to increase contribution from low-margin country liquor and a higher transfer pricing. EBIDTA grew by 24% y-o-y to Rs. 40.5 crore. This along with lower interest expenses led to 44.0% y-o-y growth in the reported PAT to Rs. 12.7 crore lower than our expectation of Rs. 19.3 crore for the quarter," said Sharekhan.

"FY2023 performance was impacted by a decline in the sugar recovery, increase in sugar SAP and higher transportation cost, which led to lower sugar production affecting margins of the sugar business. Ethanol business registered robust sales performance due to an increase in the capacity and the business contribution has gone up substantially in FY2023. The company is focusing on improving the profitability of business through improvement in the sugar recovery rate, higher contribution from the ethanol business resulting in better mix and operating efficiencies at overall level, which will help overall margins gradually improve in the coming years," said Sharekhan.

Dhampur Bio Organics Share Price Target

"Headed by an experienced management team, DBOL has strategies to deliver consistent earnings growth in the medium term. Higher contribution from ethanol sales will help the company's earnings grow in double digits with an expansion in EBIDTA margins in 2-3 years. The stock is currently trading at 9x and 8x its FY2024E and FY2025E earnings. We maintain a Buy rating on the stock with an unchanged price target of Rs. 215," said Sharekhan in a note.

Dhampur Bio Organics Shareholding

During Q1FY24, the company reported promoter shareholding of 50.45%, FIIs stake of 4.81%, DIIs stake of 0.45% and public stake of 44.30%. During the quarter under review, ace investor Anil Kumar Goel held 60,00,000 shares or 9.04% fully paid-up stake in the company. While his spouse Seema Goel held 24,58,000 shares or 3.70% fully paid-up equity stake in Dhampur Bio Organics.

Dhampur Bio Organics Share Price

On Monday, the shares of Dhampur Bio Organics opened on the BSE at Rs 166.75 apiece and while writing this copy the scrip was trading at Rs 168.25. The stock made a 52-week-high of Rs 229.00 on (19/12/2022) and a 52-week-low of Rs 115.20 on (28/03/2023).

Disclaimer

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