IDirect_BalrampurChini

7/29/2019 IDirect_BalrampurChini

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January 31, 2013

ICICI Securities Ltd|Retail Equity Research

Result Update

WHATS CHANGEDPRICE TARGET .................................................................................................... Unchanged

EPS (FY13E) ............................................................................. Changed from | 8.6 to | 8.1

EPS (FY14E) ............................................................................. Changed from | 7.4 to | 6.5

EPS (FY15E) ............................................................................................ Introduced at | 5.7

RATING............................................................................ .................Changed from 72 to 64

Higher sugar realisation drives earningsBalrampur Chini Mills (BCML) Q3FY13 results were better than ourexpectation with the company reporting a profit of | 60.2 crore. Saleswere in-line with our expectation at | 949.9 crore. Higher realisation fromthe sugar segment at | 34.67/kg and selling off of lower cost inventoryaided in improving performance in Q3FY13. Sales from co-generation anddistillery remained subdued. With sugar prices remaining within | 32-34/kg and cost of production being ~| 35/kg, earnings from sugarcompanies would remain dismal until decontrol measures are taken bythe government in consideration with the recommendations ofRangarajan Committee. We value the stock at 1x FY14E book value.Higher sugar realisation aids earningsBCML sold 2.65 lakh tonnes (lt) of sugar at an average realisation of

| 34.7/kg. It has sold off its lower priced inventory during the quarter,

which aided in recording healthy profit of | 63.4 crore from the segment

against a loss of | 82.1 crore in Q3FY12. Going ahead, we remain cautious

on the earnings from the sugar segment as the cost of production (due tohigher cane prices in Uttar Pradesh at | 280/quintal) is ~| 35/kg against

the prevailing realisation of | 32-33/kg.

By-products sales to improveDue to a delayed start to crushing season during the year, by-products

sales remained subdued. Further, with the awaited decision on ethanol

pricing, volume sales from distillery remained lower. Going ahead, the

expected higher cane production in UP led to higher availability of

bagasse & molasses, thereby driving sales form this segment.

Valuing it 1x FY14E book valueSugar stock prices have witnessed a steep correction post the decision on

SAP prices by the UP government and are trading below FY13E book

value. Considering the comparatively lighter balance sheet and BCMLsability to stay in the green despite so much government intervention

make it a better play among others. We have valued the stock at 1x FY14E

price to book with a target price of | 64 share. We maintain BUY rating.Exhibit 1:Financial Performance(| Crore) Q3FY13 Q3FY13E Q3FY12 Q2FY13 QoQ (%) YoY (%)

Net Sales 949.9 937.6 662.1 888.2 6.9 43.5

EBITDA 118.4 14.2 -11.3 120.7 -1.9 -1145.8

EBITDA Margin (%) 12.5 1.5 -1.7 13.6 -112bps 1417bps

Depreciation 27.1 28.7 27.7 27.6 -1.6 -1.9

Interest 21.6 31.0 25.8 42.1 -48.7 -16.2

Reported PAT 60.2 -30.4 -64.0 48.9 LP LP

EPS (|) 2.5 -1.2 -2.6 2.0 LP LP Source: Company, ICICIdirect.com Research

Balrampur Chini (BALCHI)| 46

ting matrix

ing : Buyget : | 64

get Period : 12 months

ential Upside : 39%

y Financials

crore FY12 FY13E FY14E FY15E

et Sales 2,309.6 3,228.3 3,135.2 3,310.9

BITDA 238.2 508.6 403.1 356.1

et Profit 6.6 197.7 159.4 139.3

PS 0.3 8.1 6.5 5.7

luation summary

FY12 FY13E FY14E FY15E

/BV 0.9 0.8 0.7 0.7

arget P/BV 1.3 1.1 1.0 0.9

V / EBITDA 7.9 3.3 3.7 4.1

/E NA 5.7 7.1 8.1

oNW(%) NA 15.1 10.7 8.5

oCE(%) 3.6 10.2 7.6 6.3

ock data

arket Capitalisation | 1124 Crore

ng Term Debt (FY12) | 763 Crore

sh (FY12) | 13.1 Crore

V | 1873 Crore

week H/L 75 / 42

uity capital | 24.4 Crore

ce value | 1

Holding (%) 13.8

Holding (%) 19.2

ce movement

3040

50

60

70

80

90

Jan-13Nov-12Aug-12May-12Feb-12

3,000

4,000

5,000

6,000

7,000

Price (R.H.S) Nifty (L.H.S)

alysts nameanjay [email protected]

arineeta Poddar

[email protected]


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ICICI Securities Ltd|Retail Equity Research Page 2

Exhibit 2:AssumptionsFY11 FY12 FY13E FY14E FY15E

Sugarcane Crushed ((in tonnes) 12570310 8462900 8930500 6925000 6692500

Recovery rate (%) 9.2 9.5 9.4 9.5 9.5

Sugar Production (in tonnes) 1240766 807200 839467 657875 635788

SugarSales volumes (in tonnes) 830728 671100 872430 800000 810000

Realisations (| per tonnes) 29676 29729 32997 34000 36000

DistillerySales volumes (in kilo litres) 70819 55996 64028 67200 56550

Realisations 25.7 28.3 28.0 28.5 30.5

PowerSales volumes (in crore) 82.9 56.2 58.1 63.2 60.3

Realisations (| /unit) 3.5 4.4 4.5 4.5 4.8

Sugarcane Prices (| / tonnes) 2301 2400 2874 2900 3050

Source: Company, ICICIdirect.com Research

Exhibit 3:Sugar sales volume & realisations (Quarterly) trend

149 115 164 159 196 152 192 239 265

28.7 28.628.2

29.729.0

29.7

34.334.7

27.8

25

27

29

31

33

35

Q5FY1

1

Q6FY1

1

Q1FY1

2

Q2FY1

2

Q3FY1

2

Q4FY1

2

Q1FY1

3

Q2FY1

3

Q3FY1

380

120

160

200

240

280

Sugar Volumes (in tonnes)-RHS Sugar realizations (| per kg)-LHS


Exhibit 4:Distillery sales volume & realisation (Quarterly) trend

5.0 18.9 20.8 10.2 6.9 16.8 20.0 21.3 3.8

26.827.9

33.9 33.8

27.626.126.7

23.8

26.3

18

21

24

27

30

33

36

Q5FY11

Q6FY11

Q1FY12

Q2FY12

Q3FY12

Q4FY12

Q1FY13

Q2FY13

Q3FY13

0

4

8

12

16

20

24

Distilery Volumes (in KL)-RHS Distillery realizations (| per litre)-LHS


gher sugar sales volume and higher realisation have aided the

mpanys topline from the segment

e company has sold lower volumes of ethanol as it is awaiting

e decision on ethanol pricing. Further, with a delayed start of

e crushing, molasses for ethanol production were also lower


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Exhibit 5:Co-generation sales volume and realisation

1132 2181 1468 364 1281 2209 1734 468 975

4.0 4.1

4.8

4.2 4.1 4.23.94.0

4.1

0.0

0.7

1.4

2.1

2.8

3.5

4.2

4.9

5.6

Q5FY11 Q6FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13

0

500

1000

1500

2000

2500

Power Volumes (in lakh units) Power realizations (| per unit)


Revising EstimatesWith the countrys sugar production in 2013 expected to be marginally

higher YoY at ~24 MT, we believe sugar prices for the FY14E would

continue to remain under pressure. Further, with the governments stance

to keep inflation under control and recommendation of the Rangarajan

Committee standing due for a long time, we remain cautious on the

companys revenue and earnings growth. Hence, we are revising our

estimates for FY14E. We are introducing our estimates for FY15E

expecting a realisation of | 36/kg and sugarcane price of | 305/quintal.

Exhibit 6:Revising EstimatesParticulars FY15E

Old New % Change New

Revenue 3,213.7 3135.2 (2.4) 3310.9

EBITDA 430.9 403.1 (6.5) 356.1

EBITDA Margin % 13.4 12.9 -55 bps 10.8

PAT 181.1 159.4 (12.0) 139.3

EPS 7.4 6.5 (12.0) 5.7

FY14E


Due to the delayed beginning of crushing, there was a

lower availability of bagasse that led to a fall in the co-

gen volumes


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Financial Performance

Exhibit 7:Profit & loss Account(| Crore)

(Year-end March) FY12 FY13E FY14E FY15E

Total operating Income 2,309.6 3,228.3 3,135.2 3,310.9

Growth (%) NA 39.8 -2.9 5.6

Raw Material Expenses 1,775.5 2,433.3 2,442.1 2,600.5

Employee Expenses 117.7 122.3 125.4 152.3

Marketing Expenses 0.0 0.0 0.0 0.0

Administrative Expenses 0.0 0.0 0.0 0.0

Other expenses 178.1 164.1 164.6 202.0

Total Operating Expenditure 2,071.3 2,719.7 2,732.1 2,954.8

EBITDA 238.2 508.6 403.1 356.1

Growth (%) NA 113.5 -20.7 -11.7

Depreciation 110.8 110.8 115.8 116.7

Interest 147.4 166.2 102.4 83.4

Other Income 27.7 22.5 24.8 27.3

PBT 7.8 254.2 209.7 183.3

Others 0.0 0.0 0.0 0.0

Total Tax 1.2 56.5 50.3 44.0

PAT 6.6 197.7 159.4 139.3

Growth (%) NA NA -19.4 -12.6

EPS (|) 0.3 8.1 6.5 5.7 Source: Company, ICICIdirect.com Research

Exhibit 8:Cash Flow Statement(| Crore)


Profit before Tax 1.6 254.2 209.7 183.3

Add: Depreciation 115.5 110.8 115.8 116.7

(Inc)/dec in Current Assets -566.8 204.6 -21.7 -146.8

Inc/(dec) in CL and Provisions 526.7 -277.5 58.7 47.5

Others 118.5 87.2 27.2 12.1

CF from operating activities 195.5 379.3 389.7 212.9

(Inc)/dec in Investments 1.4 -10.0 -10.0 -10.0

(Inc)/dec in Fixed Assets -9.5 -20.0 -20.0 -20.0

Others -48.4 22.5 24.8 27.3

CF from investing activities -56.6 -7.5 -5.2 -2.7

Issue/(Buy back) of Equity -77.0 0.0 0.0 0.0

Inc/(dec) in loan funds -31.2 -99.0 -99.0 -49.0

Dividend paid & dividend tax -3.0 0.0 0.0 0.0

Payment of Interest -150.9 -166.2 -102.4 -83.4

Others -21.3 -110.8 -115.8 -116.7

CF from financing activities -283.4 -376.0 -317.2 -249.1

Net Cash flow -144.5 -4.2 67.3 -38.9

Opening Cash 154.9 13.1 8.9 76.2

Closing Cash 13.1 8.9 76.2 37.3 Source: Company, ICICIdirect.com Research

Exhibit 9:Balance Sheet(| Crore)


LiabilityEquity Capital 24.4 24.4 24.4 24.4

Reserve and Surplus 1,187.7 1,385.4 1,544.7 1,684.0

Non-Current LiabilityLong Term Borrowings 497.7 397.7 297.7 247.7

Deferred Taz Liabilities (Net) 224.5 224.5 224.5 224.5

Long term Provisions 11.0 11.0 11.0 11.0

Other long term liability 2.9 3.9 4.9 5.9

Current LiabilitiesShort term Borrowings 1,221.2 1,171.2 1,131.2 1,091.2

Trade Payable 617.3 358.7 383.2 423.1

Other current Liabilities 417.3 448.4 522.5 570.2

Short term provisions 2.6 2.6 2.6 2.6

Total Liabilities 4,206.6 4,027.8 4,146.8 4,284.7

Fixed AssetsTangible Assets 1,613.8 1,633.8 1,653.8 1,673.8

Intangible Assets & CWIP 1.2 1.2 1.2 1.2

Non current assets 42.2 52.2 62.2 72.2

Long term Loans and Advances 62.1 62.1 62.1 62.1

Deferred tax assets 0.0 0.0 0.0 0.0

Other non-currents assets 0.8 0.8 0.8 0.8

Current AssetsInventory 1,997.8 1,614.1 1,654.7 1,747.4

Sudry Debtors 147.0 161.4 156.8 183.9

Cash & Bank 13.1 8.9 76.2 37.3

Short-term Loans & Advances 328.6 493.2 479.0 505.8

Other current assets 0.0 0.0 0.0 0.0

Total Assets 4,206.6 4,027.8 4,146.8 4,284.7


Exhibit 10:Ratio Analysis(Year-end March) FY12 FY13E FY14E FY15E

Per share data (|)

EPS 0.3 8.1 6.5 5.7Cash EPS 4.8 12.6 11.3 10.5

BV 49.6 57.7 64.2 69.9

DPS 1.2 1.6 1.6 1.6

Cash Per Share 0.5 0.4 3.1 1.5

Operating Ratios (%)

EBITDA Margin 10.3 15.8 12.9 10.8

PBT / Total Operating income 0.3 7.9 6.7 5.5

PAT Margin 0.3 6.1 5.1 4.2

Inventory days 149 180 190 190

Debtor days 15 18 18 20

Creditor days 55 40 44 46

Return Ratios (%)

RoE 0.5 15.1 10.7 8.5

RoCE 3.6 10.2 7.6 6.3RoIC 18.9 29.6 24.4 21.7

Valuation Ratios (x)

P/E NA 5.7 7.1 8.1

EV / EBITDA 7.9 3.3 3.7 4.1

EV / Net Sales 0.8 0.5 0.5 0.4

Market Cap / Sales 0.5 0.3 0.4 0.3

Price to Book Value 0.9 0.8 0.7 0.7

Solvency Ratios

Debt/EBITDA 3.2 1.1 1.1 1.0

Debt / Equity 0.6 0.4 0.3 0.2

Current Ratio 1.1 1.1 1.2 1.2

Quick Ratio 0.2 0.3 0.3 0.3



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Company Description

Balrampur Chini Mills is the second largest sugar manufacturing company

in India. Currently, all its plants are located in eastern Uttar Pradesh. Thecompany operates six sugar factories with an aggregate crushing

capacity of 76,500 tonnes crushed per day, distillery and power capacity

of 320 Kilolitres per day and 126 MW (saleable), respectively.

Exhibit 11:Recommendation History

0

10

20

30

40

50

60

70

80

90

Jan-13Dec-12Nov-12Sep-12Aug-12Jun-12May-12Mar-12Feb-12

Price Target Price


Exhibit 12:Recent ReleasesDate Event CMP Target Price Rating

4-Apr-12 Q4FY12 Preview 57 47 HOLD

30-May-12 Q4FY12 Result Update 50 60 BUY

5-Jul-12 Q1FY13 Preview 57 60 HOLD

9-Aug-12 Q1FY13 Result Update 66 82 BUY

8-Oct-12 Q2FY13 Result Preview 67 82 BUY

9-Nov-12 Q2FY13 Result Update 65 82 BUY

8-Jan-13 Q3FY13 Result Preview 67 82 BUY Source: Company, ICICIdirect.com Research

ICICIdirect.com Universe (Sugar)CMP M Cap

(|) TP(|) Rating (| Cr) FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14EBajaj Hindustan (BAJHIN) 29 22 Sell 1,726 0.5 -3.7 2.2 55.2 - 13.4 6.0 10.8 6.4 6.0 3.0 8.2 0.3 -5.6 3.3

Balrampur Chini (BALCHI) 46 64 Buy 1,124 0.3 8.1 6.5 - 5.7 7.1 7.9 3.3 3.7 3.6 10.2 7.6 0.5 15.1 10.7

Dhampur Sugar (DHASUG) 66 77 Buy 427 4.7 11.8 7.7 14.1 5.6 8.5 6.4 4.6 5.2 8.5 20.6 15.6 4.1 26.5 16.0

Renuka sugar (RENSUG) 31 32 Hold 2,214 -0.5 3.0 8.5 - 10.2 3.7 6.5 8.1 5.2 6.7 5.3 10.1 -1.4 8.1 18.4

RoCE (%) RoE (%)

Sector / Company

EPS (|) P/E (x) EV/EBITDA (x)



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RATING RATIONALE

CICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them

as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional

arget price is defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;

Buy: >10%/15% for large caps/midcaps, respectively;

Hold: Up to +/-10%;

Sell: -10% or more;

Pankaj Pandey Head Research [email protected]

ICICIdirect.com Research Desk,ICICI Securities Limited,1st Floor, Akruti Trade Centre,Road No. 7, MIDC,Andheri (East)

Mumbai 400 093

[email protected]

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esearch report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to

he specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.

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IDirect_BalrampurChini