The best sugar stock to make 10 times in two years. Any guess ?

Sugar prices are jacking up after a long period. Already ruling at Rs 32/ kg instead of Rs 22/ kg in August. Sugar stock prices are on ramp up now. In last three months clear winners are Dwarikesh, Dalmia, Mawana etc. Can anybody help to understand which are stocks to go up at least 10 times in next two years to ride the boom in this cyclical story.
Note - I am highly bullish and invested in sector.

 

there's a lot of factors at play in sugar - global and domestic

among domestic - politics is one of the major ones affecting the mills, prices are regulated, UP based mills will be looking at the State Advised Price on Jan 12, although the crushing season has begun, SAP will affect the procurement and this is all despite the fair and remunerative price (FRP) announced by the Centre and UP based mills will be affected by this

there's a lot of arrears for previous crushing seasons and the case is in High Court

Exports are also regulated and domestic prices controlled. At the end of the day, how much of the rise in prices translates to profits for mills?

I'm no expert but just read up on the sector because I've a trading position too. South India based companies like EID Parry, Bannari Amman, Sakthi Sugars & Andhra Sugars will be a good play. UP based mills - the State restrictions and debt are a problem.

Your question of stocks which can be up at least 10x in 2 years, wish I knew at least one.

 

Thanks Bombayboy for writing your views. I agree with you. Each and every word is true as a fact but I derive different conclusion. I see these UP Companies as opportunity. These companies are available at 10% market cap of annual sales even today. Sugar price is the main culprit so problem is not only in UP, it is worldwide. Why Renuka Sugar is available at 10% M Cap of annual sales ? Half of its operations are in Brazil where no sugarcane prices are paid like UP. Real culprit is glut in sugar production for five years so no value of sugar commodity. The share prices have already discounted bankruptcy. Now sugar prices have already increased but stock have not increased that much.Now sugar price is Rs 32 perKG instead of 22 per KG two month before. This 50% hike will go directly to bottomline. One can expect three times profits of present narket cap. I see big opportunity here and no confusion at all. I posted question just to understand which stock is going to increase more. Also to understand what other fellows are thinking, their thought process. But my post received only one reply, it indicates that market is still unaware of potential. May be after two months everybody will discuss sugar here. It increased my conviction in sugar,"Profit lies where nobody looks".

 

In 1989 ACC was only Rs 90 per share. Share was Rs 100 paid FV. iT STARTED TO MOVE UP AND BECAME boom leader of 1990, 91, 92 and reached Rs 2500. I was totally unaware why stock was riding because balance sheet was worst. After I came to know the theory of cement price. Cement sack price increased from Rs 40 to 90. This was the reason.

 

Every bond is AAA bond at a price. Every stock is a multibagger at a price. Now see the price of sugar companies not the problems.

 

Lot to take out from your views..
So what is your pick in this sector Rajesh....?

 

Phil phisher says that the worst stock performs best when commodity turns cycle. So I am in search of worst stock which have not performed yet. But I could not find yet. So far I have Dwarikesh, Simbhaoli, Renuka, Oudh Sugar, Rajshree. But these are good companies. I need some inefficient companies which will rise more as per ...Guru Philp Phisher. Please do some scuttlebutt and suggest. I know some names but stocks are illiquid so can not purchase. But price is mouthwatering. Can you imagine Rs 400 crore turnover company quoting at just Rs 10-20 crore M Cap....Ha....Ha...but no liquidity, you can not purchase.
I want prices to stay here so I can purchase more. My problem is I can not sell my existing holdings to purchase Sugar as a rule of thumb,"Don't put all your eggs in one basket'. I have 9% of my portfolio.

 

Consider it like this. Rs 400 crore sales and loss Rs 50 crore. Now Sugar prices have increased 50% so sales become 600 crore, this 200 crore difference goes to bottomline. Company posts Rs 150 crore profit. Consider P/E ratio 5 so M Cap should be Rs 750 crore. If M Cap is Rs 20 crore, it is no brainer 37.5 bagger in one, two year. So what if company is in BIFR experiencing CDR. So what if company has Rs 200 crore debt. These are all already counted in price.

 

Rajesh,

I don't believe nobody is looking at sugar. The fact that these stocks have risen 100-200% since last September is an indication that the sector is certainly fancied. Brazil has other problems (nature and politics), never read about the pricing mechanism so I'll go with what you say. Renuka is the largest domestic player too. MCap/Sales and it's cheap. But debt. UP based mills, do take a look at cane arrears. The retail prices are up but isn't it the traders who benefit from the price variation in the retail market? The ex-mill prices are a lot lower than the retail price. I'd be happy to see everybody make money.

The ACC story is interesting. But wasn't that during the Harshad Mehta period? And from whatever I've heard or read, you needed permit to buy cement and there was black marketing. How times change!

 

BombayBoy,
You are right, it was Harshad Mehta time. Lack of checks and balances, regulators created Harshad Mehta. Decontrol and de-licensing caused spurt in cement prices. He only did not create the boom. As far as debt is concerned, Renuka has Rs 6551 cr Debt whereas inventory is Rs 2200 cr. Now this inventory will price more than 3000 cr as sugar prices are increased.
Many companies have inventory equal to debt like Dwarikesh, Dalmia etc. If we see the future cash flows, debt is not a big problem for many companies in changed scenario. Companies have debt that's why they are cheap.
Many UP based companies have no arrear to be paid to farmers just go through balance sheets and annual reports. General comments appearing in news papers will not work here. Go through specific companies for debt and arrear, you will find the opportunity as there is no debt, no arrear in many companies. The best performers so far are share of UP Comapnies.

 

Joker in the pack will be sustainability of prices of sugar, nothing else. One off profits will not increase share prices. See what happened to Torrent pharma. I am not sure here as sugar plant is erected within 6 months.

 

Hi Rajesh & Bombayboy,

I am holding Renuka sugar - 250 stocks @ 15 Rs and planning to add few more. It is the only sugar stocks which I holds.

Is it good to hold or should I try to look other on the same sector. How about expecting 20 to 35% return in short term (3 or 4 months). Please share your opinion.

Cheers..!!!!

 

which stock you are talking about ?

 

Hi,

Renuka is a good bet. If there's some triggers, you'll easily see 30-40% gains in a few days. Look at trading opportunities within the sugar pack. I think there's a lot of discussion up there, can't really add anything more.

Doubt if sugar and coffee stocks can make money in the near-term: Anand Tandon

 

Hi Rajesh and BombayBoy,

I have not Renuka sugars yet, thought it has seen deep down. Can I hold in the hope of rise or wipe it out..

Whats your call..?

cheers..!!

 

Balrampur Chini made a new yearly high in this market and is holding. Renuka has managed to hold onto ₹12 levels. Keep a stop loss if you aren't comfortable or average when you get a chance. Look at the results and developments affecting sugar sector.

If it was my money, I'd trade rather than invest in sugar. Momentum is your friend.

Also regarding your SKS Microfinance query, I'm not tracking it or any microfinance co. But close to yearly high, take your chances. It's an F&O stock, expect volatility. Congratulations on a good trade.

Good Luck!

 

Dear PNSK99,
I can not comment on direct questions to hold, sell or switch. I am not that confident to advice. You have to take your call here. I am bullish on sugar sector for 1 and half year perspective only not forever.
Momentarily prices have come down heavily in America. Today also sugar prices are falling in America. I thought to sell 50% of my holdings today but changed the mind at the 11th hour seeing that Indian sugar and stock prices are still firm. So I thought prices can not go down like this and these have to recover because of shortage. Now I have decided to stay here at least one year. Actually I don't do short term trades as no time and no trading mindset.
Now I think in short term Indian sugar share prices can come down because of downfall in international prices. I shall buy more if it happens.

 

I agree

 

I hv slowly accumulated renuka sugars