HomeBusinessSugar stocks: Sugar stocks may sustain rally after ethanol push

Sugar stocks: Sugar stocks may sustain rally after ethanol push

Mumbai: Sugar stocks are prone to carry the bullish momentum of the previous two weeks because the nationwide coverage framework for the sweetener is beneficial, with New Delhi persevering with to push the ethanol mixing programme (EBP) to assist offset any provide overhang and decrease import payments.
gained 20% previously two weeks, whereas EID Parry, Triveni Engineering, Dalmia Bharat Sugar and rallied over 15%. Dwarikesh Sugar, Avadh Sugar, and Uttam Sugar Mills surged 34%, 37%, and 27%, respectively, previously two weeks.

“With Karnataka, the third-largest sugar producing state in the country also keen to join the ethanol push, we believe that the current season also augurs well for sugar companies as far as ethanol sales are concerned despite a 75% rise in ethanol revenues during the last season,” mentioned S Ranganathan, head of analysis, LKP Securities.



“Besides improving the balance sheet and cash flows of sugar mills, higher ethanol sales also ensure timely payment of cane dues to farmers and balance out sugar inventories. We remain optimistic on the sector for CY2022 as well,” he added.

Oil advertising firms have already contracted for 3.69 billion litres of ethanol for the present advertising yr (December-November). Another 0.94 billion litres will likely be contracted within the subsequent few weeks. Meanwhile, home and international sugar costs have remained agency, with sugar manufacturing in India touching 11.6 million tons till end-December.

“We continue to remain bullish on the sugar sector as government policies on sugarcane price, MSP, buffer stock, export subsidies, and ethanol prices would ensure the survival of the weakest,” mentioned Achal Lohade, analyst, JM Financial Services. “Well-managed sugar companies could generate enormous earnings/cash flows in the process.”

“We believe ethanol prices are currently significantly above petrol and alcohol import parity prices as the government is aiming at twin objectives of surplus sugar being diverted to ethanol and a reduction in carbon emissions and dependence on crude imports,” he added.

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