DHAMPUR SUGAR MILLS LTD.
 
  

 
 

SHARETIPSINFO >>Research Reports >> DHAMPUR SUGAR MILLS LTD. (16-July-2009)

 

LISTING
CMP

Rs 59

52 WEEK HIGH/LOW

Rs 77/Rs 19.35

Face Value

Rs10

PE Ratio

8.8

P/BV

2.1

Market Cap
Rs 328 crore

 

COMPANY OVERVIEW:
Dhampur Group was established in the year 1933. It has the crushing capacity of 39500 tcd with power generation capacity of 125 mw and distillery capacity of 270 KLPD. In addition the company has sugar refining capacity of 1700 tpd.


KEY REASON FOR INVESTMENT:
Dhampur sugar mills ltd. (DSML) holds inventory of 2.3 lakh tons. The average cost of the inventory is Rs19/Kg. We expect the retail price of sugar to increase in 2010 further. This will give windfall gain to the company.
We expect that DSML realization in 2010 will be anywhere around Rs27/ kg. We believe better realization together with higher level of inventory will increase the profit margin.
We feel sugar will be in short supply next year also.
Company has increased its exportable power capacity by 33% to 80 mw.
Since company does not have any significant capital expenditure in coming years and sugar cycle is also in upward cycle, there will be free cash to deleverage the balance sheet.

KEY RISK:
Any substantial jump in the price of cane will adversely impact the margin.
Government interference can also impact the realization of the company.
Fall in international sugar price will also adversely impact the valuation of the company.

PRODUCT MIX:


Product Name

 

 

 

 

Sales Value (Cr.)

Product Mix(%)

Sugar

 

 

 

 

508.29

67.70

Chemicals

 

 

 

 

130.07

17.32

Electricity

 

 

 

 

51.93

6.91

Other Services

 

 

 

 

23.29

3.10

Molasses

 

 

 

 

21.99

2.92

High Speed Diesel (Trading)

 

 

 

 

5.90

0.78

Miscellaneous Income

 

 

 

 

3.37

0.44

Others

 

 

 

 

2.49

0.33

Lease Rentals

 

 

 

 

2.10

0.27

Licence

 

 

 

 

0.63

0.08

Motor Spirit (traded)

 

 

 

 

0.47

0.06

Farm Produce

 

 

 

 

0.08

0.01

Lubricants(traded)

 

 

 

 

0.05

0.00

Income From Investment

 

 

 

 

0.03

0.00

 

SHAREHOLDING PATTERN:

 

 

NO. OF SHARES

% OF TOTAL

PROMOTER

22446314

 

42.59%

 

INSTITUTION

7986103

 

15.15%

 

GENERAL PUBLIC

22273558

 

42.26%

 

GRAND TOTAL

52705975

 

100%

 

FINANCIAL:

 

 

30/09/05

30/09/06

30/09/07

30/09/08

TOTAL INCOME

777.85

1033.56

606.78

696.66

yoy %change

 

32.90%

-41.20%

14.80%

EXPENDITURE

-648.43

-915.39

-615.76

-572.13

PBDITA

 

129.42

118.17

-8.98

124.53

yoy %change

 

-8.70%

-107.60%

1486%

DEPRECIATION

-18.57

-20.22

-33.24

-53.37

PBIT

 

110.85

97.95

-42.22

71.16

INTEREST

 

-43.48

-20.89

-44.52

-77.31

PBT

 

67.37

77.06

-86.74

-6.15

TAX

 

-10.58

-51.06

17.92

9.76

EXTRA ORD ITEM

0

76.54

8.16

0

PAT

 

56.79

102.54

-60.66

3.61

yoy %change

 

80.56%

-159.20%

106%

KEY HIGHLIGHTS:
Total Income has increased yoy by 14.8% in FY2008 after falling by more than 41% in FY2007.
PBDITA has also shown improvement of 1486% in FY2008 after falling by more than 107% and PBDITA going into negative in FY2007.PAT moved up by 106% in FY2008 after it took hit of -159% in FY2007.

RATIOS:

 

 

30/09/05

30/09/06

30/09/07

30/09/08

EPS

 

10.77609

19.45731

-11.5104

0.685009

PBDITA MARGIN

16.63817

11.4333

-1.47994

17.87529

NPM

 

7.300893

9.92105

-9.99703

0.518187

INTEREST COVER

2.549448

4.686603

-0.94834

0.92045

KEY HIGHLIGHTS:
EPS is positive for the FY2008 at Rs0.68. The company made turnaround last fiscal. Earlier it went into red and had EPS of –Rs11.5 for FY2007.
PBDITA margin got normal to 17.87% for FY2008 after hitting -1.47% in FY2007.
NPM is at 0.51% for FY2008 after hitting -9.99% for FY2007.
Interest cover remains below 0.92. Higher debt in the company’s book and servicing has led to the low interest cover. Company incurred debt due to its capital expenditure in the past. We expect sufficient free cash flow in the FY2009 FY2010 to bring down the debt to manageable level.

COMPARISION OF Q1FY2010 WITH Q1FY2009:

 

 

Q1FY2009

% CHANGE

Q1FY2010

TOTAL INCOME

121.67

126.50%

 

275.56

EXPENDITURE

-104.78

 

 

-228.72

PBDITA

 

16.89

177.30%

 

46.84

DEPRECIATION

-15.82

 

 

-11.17

PBIT

 

1.07

 

 

35.67

INTEREST

 

-21.87

 

 

-22.97

PBT

 

-20.8

 

 

12.7

TAX

 

2.61

 

 

-1.56

EXTRA ORD ITEM

-5.34

 

 

0

PAT

 

-23.53

147.34%

 

11.14

KEY HIGHLIGHTS:
QoQ Total Income has grown by 126.5%.
QoQ PBDITA has moved up by 177.3%.
QoQ pat has surged by 147.34%.

VALUATION & OUTLOOK:
We expect FY2009E EPS to be around Rs6.8 and FY2010E EPS to be at Rs19.5. DSML is trading at 8.8X to 2009E earning and 3.07X to FY2010 earning. Historically it has been seen that sugar stock trade in range of 4X and 7X to the forward earning. We are valuing the company at 5X to 1 yr forward earning. The fair value we arrive is Rs97.5.
The outlook of the company for next two year remains good. We expect company to generate good profit from the upward sugar cycle. But after 2yr the sugar cycle is expected to go downward and company will take a hit. So why not ride the upward cycle. The profitability growth will be reflected in the price of the company’s share.

CONCLUSION:
Investor should start picking stocks in small quantity at current level. The investment horizon should be around at least 6 months.

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