HSBC maintains 'Neutral' rating on Renuka Sugar
HSBC maintains `Neutral’ rating on Renuka Sugar but reduced the target price to Rs 70.
By ET Bureau |
SHREE RENUKA SUGARS
RESEARCH: HSBC
RATING: NEUTRAL
CMP: RS 62
HSBC maintains `Neutral’ rating on Renuka Sugar but reduced the target price to Rs 70. Shree Renuka Sugars, a global Indian sugar company, reported Q2FY10 earnings +565% y-o-y to Rs 220 crore. Q2FY10 earnings were lower than consensus earnings by 12% and expectation by 6% despite trading gains of Rs 58.1 crore. Lower volumes led to lower operating earnings excluding trading gains. HSBC has reduced FY10E earnings by 24% to Rs 820 crore based on lower volumes and lower sugar prices. Sheee Renuka Sugar keep their FY11E earnings unchanged. HSBC FY10E and FY11E earnings are lower than consensus by 28% and 44% respectively. HSBC believes that risk to earnings is skewed to the downside. The management, during the Q2FY10 results conference call, guided that sugar volumes for CY10 and half of CY11 have been hedged at 20c/lb. HSBC believes that the Vale Do Ivai operation is likely to be earnings accretive by 1-7 % for FY10-FY 11 given: 1) 2-2 .3 million tonnes of cane crushing; 2) 65:35 sugar and ethanol mix; 3) ethanol prices of BRL870/kilolitre; and 4) 12.5c/lb of sugar production cost at operating level. The management also indicated that Equipav (13.1 million tonne sugar cane capacity) is likely to be closed in a month and the deal re-negotiations could be favourable for Renuka.
RESEARCH: HSBC
RATING: NEUTRAL
CMP: RS 62
HSBC maintains `Neutral’ rating on Renuka Sugar but reduced the target price to Rs 70. Shree Renuka Sugars, a global Indian sugar company, reported Q2FY10 earnings +565% y-o-y to Rs 220 crore. Q2FY10 earnings were lower than consensus earnings by 12% and expectation by 6% despite trading gains of Rs 58.1 crore. Lower volumes led to lower operating earnings excluding trading gains. HSBC has reduced FY10E earnings by 24% to Rs 820 crore based on lower volumes and lower sugar prices. Sheee Renuka Sugar keep their FY11E earnings unchanged. HSBC FY10E and FY11E earnings are lower than consensus by 28% and 44% respectively. HSBC believes that risk to earnings is skewed to the downside. The management, during the Q2FY10 results conference call, guided that sugar volumes for CY10 and half of CY11 have been hedged at 20c/lb. HSBC believes that the Vale Do Ivai operation is likely to be earnings accretive by 1-7 % for FY10-FY 11 given: 1) 2-2 .3 million tonnes of cane crushing; 2) 65:35 sugar and ethanol mix; 3) ethanol prices of BRL870/kilolitre; and 4) 12.5c/lb of sugar production cost at operating level. The management also indicated that Equipav (13.1 million tonne sugar cane capacity) is likely to be closed in a month and the deal re-negotiations could be favourable for Renuka.
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