Likely sops from UP govt lift sugar cos on bourses

Mumbai: Shares of sugar companies rose up to 15% on Friday on expectations the UP government will announce measures to boost the sector. UP chief minister Yogi Adityanath, in a recent meeting with sugar mill owners, is said to have assured them the state will help expand mill capacities with fresh investments and double farmer incomes. Adityanath said his govern ment would ensure that cane prices are kept steady in order to help both farmers and mill owners, according to reports.

Shares of Bajaj Hindusthan closed 14.2% at Rs 17.55 higher on Friday. Simbhaoli Sugar closed 9.90% higher at Rs 36.65. Uttam Su gar jumped 7.7% to Rs 136.65. Analysts said many of these companies are highly indebted and could benefit from steady cane pricing.

“The chief minister reassured mill owners that sugar cane prices will be kept steady. This will help companies keep their operational expenditure low, while volumes growth as high as 35% without much capital expenditure, because of plantation of high yield sugar cane,“ said Aman Sonthalia, director of AK Securities.

Analysts expect shares of UP-based sugar companies to advance further due to their higher yield and decline in cane crushing volumes of Western and Southern mills. Stocks of Dwarikesh Sugar have risen 51% since the beginning of the year, while those of Dhampur Sugar Mills have risen 86%.Sonthalia expects earnings per share of Rs 25 from Balrampur Chini in the coming year.

“Balrampur Chini is the best managed across the board and is the least risky, though other companies like Dwarikesh have given higher returns in the last few months.The stock could rise to Rs 190-200 ,“ said Debashish Mazumdar, chief manager-equity research at Edelweiss Capital.