Avadh Sugar & Power led the pack, gaining 59.35%, with its final traded worth at Rs 804.15, in contrast with Rs 504.65 on July 31. Dwarikesh Sugar Industries rose 38.01%, whereas Dalmia Bharat Sugar And Industries gained 35.63%. Uttam Sugar Mills and Mawana Sugars superior 33.66% and 32.52%, respectively.
Different shares additionally recorded sturdy beneficial properties. Dhampur Sugar Mills rose 26.57%, Bajaj Hindusthan Sugar 26.06%, Dhampur Bio Organics 26.45%, Triveni Engineering & Industries 27.01%, The Ugar Sugar Works 24.45% and DCM Shriram Industries 19.40%.
Among the many bigger corporations, Balrampur Chini Mills gained 10.63%, with its final traded worth at Rs 648.90, in contrast with Rs 586.55 on July 31. E.I.D. – Parry (India) rose 4.73% to a final traded worth of Rs 795.35, whereas Shree Renuka Sugars gained 7.19% to Rs 23.42. Zuari Industries superior 4.73% to Rs 271.25.
The exception was Godavari Biorefineries, which declined 8.51% to a final traded worth of Rs 239.30, in contrast with Rs 261.55 on July 31.
ETMarkets.comRally raises valuation considerations
The sharp run-up, nevertheless, has introduced valuations into focus, with analysts divided between the bettering elementary backdrop and the chance {that a} substantial a part of the anticipated earnings enchancment could already be mirrored in inventory costs.
Avinash Gorakshakar, Founder at Avinash Mentor Analysis, mentioned the rally represents a elementary re-rating of the sector, with sugar corporations more and more being seen past their conventional cyclical profile.”The latest rally in sugar shares displays a elementary re-rating of the sector. The market is not treating these corporations purely as cyclical agricultural companies and they’re more and more being valued as structural inexperienced vitality and biofuel performs.”
Gorakshakar, nevertheless, cautioned that the sharp beneficial properties have additionally raised the bar for additional upside.
“Nonetheless, with the huge run-up, a considerable portion of the anticipated earnings from India’s 20% ethanol mixing (E20) mandate is now baked into the value. For the top-tier leaders, valuations are certainly operating forward of near-term fundamentals, pricing in flawless execution and assuming coverage stability.”
In keeping with him, the sector would wish recent elementary catalysts for the rally to maintain its momentum. One such set off could possibly be an upward revision in ethanol costs.
“Whereas the Truthful and Remunerative Worth (FRP) for sugarcane has elevated by 16%, ethanol procurement costs (particularly from B-heavy molasses) have lagged.”
“A authorities hike in ethanol costs to guard mill margins would instantly set off a brand new leg of the rally.”
He additionally pointed to international provide circumstances as one other potential catalyst.
“Opposed climate in high producers like Brazil and Thailand has tightened worldwide provides.”
“If international costs keep elevated, Indian mills profit from excessive home pricing flooring and potential export optionality.”
Gorakshakar additionally highlighted the significance of execution round ethanol procurement, saying the federal government’s push towards the 1,000+ crore litre requirement for the 2025–26 cycle requires flawless execution.
“Quicker-than-expected procurement by OMCs will lock in income visibility for sugar corporations.”
‘Market has successfully pre-paid for 2 sturdy quarters’
Harshal Dasani, Enterprise Head at INVasset PMS, mentioned the sharp beneficial properties have already factored in a good portion of the anticipated earnings enchancment.
“A lot of the seen earnings enchancment is now within the worth, and the arithmetic explains why. A 60 % inventory transfer is discounting the complete good thing about retail costs up 25 % in a month, however mill economics seize that surge solely partially and with a lag, since home gross sales stream by means of the federal government’s month-to-month launch mechanism and the crushing season’s actual earnings arrive solely from the October-November crush.”
“The market has successfully pre-paid for 2 sturdy quarters.”
Dasani additionally highlighted the policy-sensitive nature of the sugar trade, arguing that top costs might ultimately invite authorities intervention.
“What the rally ignores is that sugar is a policy-managed commodity in each instructions, and the very stockholding order that lit this rally is the federal government signalling it’ll act in opposition to worth inflation, with export curbs and release-quota tightening the usual subsequent steps.”
“Valuations are actually pricing peak-season economics as in the event that they had been sturdy, in a sector the place excessive costs reliably set off their very own reversal by means of elevated cane planting a season later.”
“Fundamentals justify power; they don’t justify extrapolation.”
Ethanol and stability sheets might separate winners
Dasani mentioned the following section of the sugar commerce could possibly be decided much less by sugar publicity alone and extra by ethanol capability and balance-sheet power.
“The differentiation runs by means of ethanol and stability sheets, not by means of sugar publicity.”
“Built-in millers with massive distillery capability have transformed a part of their income right into a contracted, government-purchased stream that bypasses the sugar cycle solely, and throughout the names in focus, the framework favours the low-debt, distillery-heavy operators of the Balrampur and Dalmia archetype over leveraged pure-play crushers, as a result of when this commerce unwinds, debt turns a correction right into a collapse.”
He recognized three potential catalysts that might drive the following leg of the rally: the annual ethanol procurement worth announcement, additional downgrades to season manufacturing estimates and a continued rise in international sugar costs.
“The subsequent leg has three potential triggers: the annual ethanol procurement worth announcement for the brand new provide yr, which is the one most necessary catalyst forward, additional downgrades to season manufacturing estimates, or international costs extending past their 14-month excessive.”
On the identical time, Dasani outlined a number of elements that might set off an unwind.
“The unwind has 4: escalating authorities intervention on costs, a robust cane-planting response organising subsequent season’s surplus, ethanol worth disappointment, and easy positioning exhaustion after a 59 % month in a traditionally fast-exiting sector.”
“The self-discipline in sugar by no means modifications: it’s a commerce with a calendar, not a compounding story, and the ethanol-heavy names are the one ones that blur that line.”
Balrampur Chini emerges as high decide
Rahul Sharma, Head of Analysis at Equity99, named Balrampur Chini Mills as his most popular inventory within the sector, citing its scale and built-in operations.
“Balrampur Chini Mills is our high decide as it’s the market chief within the sugar sector. The corporate operates 10 factories with a complete crushing capability of 77500 TCD, apart from it additionally has a distillery capability of 560 KLD.”
Trying forward, Sharma mentioned the following section of the sugar-stock rally would rely on ethanol pricing, international demand and authorities measures.
“Subsequent leg of rally in sugar shares will likely be principally pushed by Ethanol procurement worth and international sugar demand coupled with authorities interventions to maintain sugar worth in management.”
(Disclaimer: Suggestions, strategies, views and opinions given by the specialists are their very own. These don’t characterize the views of Financial Occasions)
