Buy Dhampur Sugar Mills, target price Rs 260: ICICI Direct

ICICI Direct has buy call on Dhampur Sugar Mills with a target price of Rs 260. The current market price of Dhampur Sugar Mills Ltd. is Rs 188.65.

Dhampur Sugar Mills Ltd., incorporated in the year 1933, is a Small Cap company (having a market cap of Rs 1242.44 Crore) operating in Sugar sector.

Financials
For the quarter ended 31-12-2020, the company reported a Consolidated Total Income of Rs 1090.57 Crore, up 16.84 % from last quarter Total Income of Rs 933.41 Crore and up 35.85 % from last year same quarter Total Income of Rs 802.75 Crore. Company reported net profit after tax of Rs 54.56 Crore in latest quarter.


Investment Rationale
Given rationalisation of sugar inventories and increasing distillery revenues, Dhampur would be able to generate sustainable operating cash flows. The brokerage estimates cash flow from operations of Rs 530 crore & Rs 420 crore in FY22E & FY23E, respectively. The company would be able to completely de-leverage its balance sheet in the next two to three years with debt reduction of ~Rs 950 crore in FY20-23E. It values the stock 5x FY23E earnings with revised target price of Rs 260 (earlier Rs 210). It maintains BUY recommendation.