Bullish on sugar sector: G Chokkalingam

G Chokkalingam, Executive Director & Chief Investment Officer, Centrum Wealth Management, talks to ET Now on sugar stocks.

Now that the fundamentals have changed because the domestic prices still remain the same, what’s the view really on the sugar stocks? They have fallen off quite a bit, the cycle has not changed but purely on price to replacement value maybe or other parameters, do any of these stocks look a compelling buy or you would stay away?

I am really bullish on sugar sector but certainly not on UP-based companies, though the management of UP-based sugar companies are too good, the problem is that they have been punished by the state government in times of abnormal hikes in the cane prices.

So, I would stay away from UP-based sugar companies. I would play on south-based sugar companies for a couple of reasons. Most of them are least leveraged and the state governments are also quite friendly to the industry. They have not hiked the cane prices in abnormal way in the past.

I would continue to remain as a buyer for sugar stocks like EID Parry. It is a very deep value stock. Its enterprise value is less than its investment holding in Coromandel Fertiliser. Apart from that, it has got assets of over 35000 tonne of sugar capacity and 84 MW of power.

Management is also too good and also got extraordinary skill set in going through all the tough times, so I would remain a buyer of south-based sugar stocks like EID Parry.