Agree, DBOL concall was very informative about the company and the industry.
Few key points:
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Cost reduction : Increase in recovery rate (by 0.9 to 1%) will more than compensate increase in cost due to SAP price increase. As 0.1% recovery increase translates into cost reduction by Rs 0.35 per kg of sugar so due to 1% increase in recovery cost will come down by Rs. 3 and cane cost will go up by Rs. 2 so effectively margin will increase by Rs. 1 per kg. So on 4.5 lac ton sugar it should be Rs. 45 crs.
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Revenue growth : Sugar prices will not jump but will increase to the extent of SAP increase ( which implies by Rs. 2 /kg) - even if Re 1 increase in price of sugar will translate in Rs. 45 cr for the year.
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Cane crushed for full season will be 5 to 7 % higher than last year
So all in all, DBOL profits should be at least Rs. 100 cr higher than last year - on account of recovery improvement, cane volume increase and sugar price increase. Even if sugar prices dont increase the increase in profits will be Rs. 50 crores. Post depreciation increase/ other costs annual profit should be 150crs - EPS of 23 which is similar to Dhampur sugar). At a PE multiple of 10, fair value should be Rs. 230.
Further, if they convert the ethanol plant to dual fuel and maize is available at reasonable price then ethanol volumes and profits will be higher.
Please comment - agree/ disagreeā¦
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