Balrampur Chini Q4 Results Review - A Soft Quarter Amid Challenging Environment: Systematix

Systematix Research Report

Balrampur Chini Mills Ltd. reported a weak Q4, with Ebitda plummeting 15% YoY to Rs 3.4 billion (our estimate Rs 2.5 billion). Ebitda margin contracted 304 basis points YoY to 24% (we estimated 22.5%).

Consolidated revenue dropped 4% YoY to Rs 14.3 billion (our estimate Rs 10.9 billion) due to 7%/15% YoY dip in sugar/distillery volumes, partly offset by a 6% YoY rise in sugar realisation (in line with our estimate).

Gross margin slipped 68 bps YoY to 43.1% (our estimate 45%), owing to Rs 200/tonne increase in cane cost for Sugar Season 2023-24. Interest cost surged 18% YoY to Rs 250 million due to higher interest rates and swelling working capital, as Balrampur Chini deployed internal accruals into projects.

Consequently, PAT dropped 20% YoY to Rs 2 billion (our estimate Rs 1.6 billion). Management is optimistic that the government would soon prioritize diverting sugar towards ethanol, which would not only alleviate the rising sugar inventory levels, but also add support to sugar prices, as sufficient sugar stocks are expected to be available by the end of SS 2023-24.

While we have cut our EPS by 7% for FY25E to factor in the higher cane costs in the current season, we have slightly raised it by 2% for FY26E to factor in the expected higher realisations from sugar and ethanol. Reiterating Buy with an SoTP-based target price of Rs 501 (from Rs 488), based on implied FY26E P/E of 14 times and EV/ Ebitda of 10 times.

Key risks: Cane availability and soft sugar prices.

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