Balrampur Chini Q1 Results Review - Resilient Performance; Maintain Buy: Systematix

Systematix Research Report

Balrampur Chini Mills Ltd.’s Q1 FY25 numbers surpassed estimates, demonstrating resilient performance despite a challenging quarter. Consolidated revenues grew 2% YoY to Rs 14.2 billion (11% above estimate of Rs 12.7 billion).

A 9% YoY drop in distillery revenues due to government restrictions on the usage of select feedstock was offset by strong performance of the sugar segment, driven by higher sugar volumes and realizations.

Gross margin slipped 54 basis points YoY to 25% (in line with estimate) due to higher production costs owing to Rs 200/tonne increase in cane price for Sugar Season 2023-24. Ebitda grew 2% YoY to Rs 1.7bn (19% above estimate of Rs 1.4 billion). Ebitda margin was flat YoY at 11.7% (estimate of 11%).

We are optimistic that the government will announce -

1. higher minimum Selling Price for sugar,

2. lift restrictions on the use of juice/B-Heavy molasses feedstock for ethanol, alleviating the rising sugar inventory levels, and

3. raise ethanol prices before the start of 2024-25 crushing season (Oct/Nov 2024).

Management believes the government may allow exports only by Jan-Feb 2025, when it can reasonably estimate the production. While we have cut our EPS by 10% for FY25E to factor in lower cane crush and ethanol production, we have slightly raised it by 3% for FY26E to factor in the expected higher realisations from sugar and ethanol.

Reiterating Buy with an SoTP-based target price of Rs 589 (from Rs 501), based on implied FY26E price/earning of 16 times and enterprise value/ Ebitda of 11 times. Key risks: Soft sugar and ethanol prices.

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