The Uttar Pradesh Government has recently raised SAP for sugarcane by Rs 20 per quintal, surpassing the market’s expected increase of Rs 15 per quintal. This move resolves the last major uncertainty in the sector.
Despite this, the sector has already factored in all the negative aspects. Currently, stock valuations are below one standard deviation from the average of the past three years, yet they maintain respectable ROCE of over 15%, even under challenging conditions.
The combined effect of two factors might balance each other out: (a) the additional remuneration for C-heavy ethanol and Maize ethanol at INR 6.87 and INR 5.8 per litre respectively, as announced by oil marketing companies in early January 2024, and (b) the SAP increase of INR 5 per quintal, which was more than anticipated.
Balrampur and Triveni are at less than 10x FY26 consensus estimates.
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