Balrampur Chini, Triveni, Dhampur Sugar, Shree Renuka others: Ethanol volume uncertainties weigh on outlook
Sugar sector faces challenges as government restricts diversion to ethanol, impacting Balrampur Chini Mills, Dwarikesh Sugar Industries, Dhampur Sugar Mills stocks. Production dips to 31.6 MMT in Sugar Year 2024, with UP seeing an 8.0% decline. Despite improved recovery at 10.09%, Centrum Stock Broking expects SY24 production at 32.0 MMT. Analysts foresee negative outlook due to ethanol volume regulations and potential inventory pressure, despite easing negative news flow. Dwarikesh Sugar’s March’2024 performance disappoints amid subdued sales and crushing numbers.
The concerns in the recent past have weighed on diversion of Sugar to Ethanol production. Government in order to control Sugar prices has not allowed significant diversion of Sugar. Hence the crushing season in Sugar year 2024 though may be showing favorable production trends , nevertheless the Balrampur Chini Mills, Dwarikesh Sugar Industries, Dhampur Sugar Mills , Shree Renuka Sugar share prices with exception of few manufacturers have not seen major gains.
Sugar Year or Sugar Season starts from 1st October and ends on 30th September.
According to the State-wise crushing data for Sugar Year 2024, sugar production stood at 31.6 MMT (million metric Tonne), which is lower compared to 32.2 MMT in the previous year at the same time, suggest Centrum Stock Broking data. Additionally, the total amount of sugarcane crushed has dropped to 313 MMT, a 4.3% decline, as contrasted to roughly 327 MMT in SSY23 over the same time frame.
The state of UP has experienced a steep decrease and production is down 8.0% YoY due to lower sugar cane availability. This has put pressure on country wide crushing numbers and is the reason for this decline. There is no major significant rise in production compared to a month ago. However there is some rise in production of Sugar from Maharshtra that has surprised as well as compensated for the loss in production from the state of UP.
On a national scale, the sugar recovery numbers for Sugar season 2024 have improved on year-on-year basis at 10.09% – thanks to lower diversion. In this backdrop, analysts at Centrum Stock Broking expect sugar production in SY24 to touch 32.0 MMT, compared to 33.1 MMT in SY23. ‘
While the production numbers are favorable, nevertheless lower production has failed to lift earnings outlook for sugar producers. The higher diversion of sugar towards production of Ethanol had improved earnings outlook for manufacturers as had helped manage higher sugar inventories. Nevertheless now there is uncertainty on further benefits as Ethanol production is not expected to rise in the near term keeping analysts and experts cautious.
Analysts at Centrum Stock Broking say that their overall outlook on the sugar sector remains negative. This perspective is influenced by notifications from the Government of India affecting ethanol volumes, with a likelihood of a more significant impact on FY25 financial performance. Additionally, the increase in sugar production would lead to higher inventory levels and is expected to exert downward pressure on sugar prices., they added.
However, analysts add that the worst is over for the sector in terms of negative news flow.
Meanwhile the earning performance uphill now by producers as Dwarikesh Sugar mills for the MArch’2024 quarter have failed to lift investor sentiments. Analysts at Systematix Research said that “Subdued sales and offtake coupled with falling crushing numbers and lower capacity utilization impacted Dwarikesh Sugar performance during the March quarter.
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