I was also expecting better margins. Management could have communicated better during the Q3 call about the impact on margins because of elevated Maize prices. What most of the investors took away from the call is that in Q4, we will benefit from
- Cost savings from the Boiler plant
- Hike in Ethanol prices
Management has now said that this dip in margins should reverse as Maize prices have cooled off due to bumper harvest. Lets see.
Even if there isnt much improvement I expect the following in the current financial year:
Revenue around Rs 2400 cr (Rs 1750 cr for Distillery and Rs 650 from Edible Oil (EO))
EBTDA of around Rs. 240-250 cr (Rs 220-230 cr from Distillery, Rs 20 cr from EO)
*Wild guess as I am not clear on the path to be followed for EO business.
I actually am eager for them to ramp down EO business as fast as possible, and the company to be not categorized under the Edible Oil sector. It impacts the margins of the business as well as the multiple the stock gets from the market.
Sometime after the current EO plant is wrapped up and some required machinery moved to the Distillery land, BCL will also receive proceeds from selling the 11 acre plot in Bhatinda where their current EO complex stands. Anyone who has idea about Bhatinda land values can do some scuttlebutt and share what may be the ballpark figure.
Now what an investor needs to decide what should be the stock price of a company generating around Rs 250 cr EBITDA at around 10% margin (13-14% for Distillery, low single for EO). I feel it is undervalued currently by a fair margin.
The year after we will have hardly any EO, margin accretive 75KLPD Biodiesel and 150 KLPD additional Distillery capacity)
Disclosure: Invested.
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