Balrampur Chini Mills (Q4 FY14)

India Infoline News Service | Mumbai |

Balrampur Chini’s Q4 revenues declined 6% yoy on lower sugar volumes yoy and pressure on pricing

CMP Rs62, Target Rs57, Downside 8.7%
  • Balrampur Chini’s Q4 revenues declined 6% yoy on lower sugar volumes yoy and pressure on pricing  
  • Higher realizations of allied products countered adverse impact of sugar segment
  • FY14 margin declined on elevated cane costs and subpar sugar realizations
  • Expect input cost pressure to weigh on profitability though by-products contribution could act as offsetting factors; retain Market Performer 
Result table
(Rs m) Q4 FY14 Q4 FY13 % yoy FY14 FY13 % yoy
Net sales 7,000 7,447 (6.0) 26,649 32,748 (18.6)
Material costs (3,229) (4,894) (34.0) (20,909) (25,190) (17.0)
Staff costs (456) (404) 13.0 (1,417) (1,295) 9.5
Other overheads (932) (914) 2.0 (2,143) (2,067) 3.7
Operating profit 2,383 1,237 92.7 2,181 4,198 48.1
OPM (%) 34.0 16.6 1,744 bps 8.2 12.8 (464) bps
Depreciation (270) (262) 3.1 (1,096) (1,084) 1.1
Interest (229) (267) (14.2) (1,178) (1,439) (18.1)
Other income 85 259 (67.1) 268 423 (36.5)
PBT 1,970 967 103.6 175 2,098 (91.7)
Tax (71) (258) - (90) (485) (81.4)
Effective tax rate (%) 3.6 26.6 - 51.7 23.1 -
Reported PAT 1,899 710 - 85 1,613 -
Source: Company, India Infoline Research

Weakness in sugar offset by higher allied product realizations
Balrampur Chini (BRCM) reported 6% yoy lower revenues on the back of weakness in sugar division. Sugar sales declined 3.6% yoy while free sugar realization fell 10.7% yoy as prices remained under pressure over the past 12 months. However, by product pricing especially alcohol remained healthy and offset the adverse impact of sugar performance. Though distillery production improved 20.3% yoy, combined distillery sales (ethanol + RS&ENA) dropped 11.7% yoy; the volume drag was countered by better blended realizations which jumped 20.4% yoy. Co-gen production was down 1% but power sales were largely flat yoy and supported by 4.4% higher price/unit.  

FY14 margin was lower by 464bps yoy on elevated cane costs and subpar sugar realizations. Reported PAT was bolstered by lower effective tax rate though offset by lower other income yoy.  FY14 revenues too were impacted by weakness in sugar the impact of which flowed through EBIDTA (down 48% yoy) and a negligible PAT.   

Key operating highlights
Parameter Q4 FY14 Q4 FY13 % yoy
Cane crushed 5.7 5.7 0.2
Sugar produced 0.56 0.55 2.3
Recovery (%) 9.9 9.7 -
Sugar sales (mn tons) 0.18 0.19 (3.6)
Free sugar realizations, Rs/kg 28.9 32.4 (10.7)
Distillery production, mn ltrs 32 26 20.3
Distillery sales, mn ltrs 19 21 (11.7)
Avg alcohol realization, Rs/l 34.8 28.9 20.4
Power production, mn units 348 351 (1.0)
Power sales, mn units 229 229 (0.3)
Avg realization (Rs/unit) 4.0 3.8 4.4
Source: Company, India Infoline Research

High input costs to weigh on profitability; retain MP
Balrampur chini has indicated cane arrears have risen to an unprecedented level of Rs100bn for the industry owing to the elevated level of input costs while sugar realizations have not kept pace with the rising cost of production. We expect input costs to continue to weigh on sugar profitability even as by-products pricing would offset the adverse impact to some extent. We introduce FY16 forecasts and in lieu of recent run up in stock price, retain Market Performer with revised 9-12mth target of Rs57.

Financial summary
Y/e 31 Mar Rs m FY13 FY14E FY15E FY16E
Revenues 32,748 26,649 28,382 30,794
yoy growth (%) 41.8 (18.6) 6.5 8.5
Operating profit 4,198 2,181 2,503 2,925
OPM (%) 12.8 8.2 8.8 9.5
Reported PAT 1,613 85 194 476
yoy growth (%) - (94.8) 129.0 145.9





EPS (Rs) 6.6 0.3 0.8 1.9
P/E (x) 9.5 180.2 78.7 32.1
P/BV (x) 1.2 1.2 1.2 1.3
EV/EBITDA (x) 7.4 12.7 11.0 9.6
Debt/Equity (x) 1.3 1.3 1.2 1.1
ROE (%) 12.8 0.7 1.5 3.9
ROCE (%) 10.5 4.2 5.4 7.2
Source: Company, India Infoline Research

 

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