Balrampur Chini

Best play in sugar

-Above Alpha Research
Introduction and key points
• Balrampur Chini Mills Limited (BCML) is one of the largest sugar manufacturing companies in India with a significant
strength in the manufacture of downstream products like power (co-generation) and ethanol. The company has 10 sugar
plants in Eastern and Central part of Uttar Pradesh with a crushing capacity of 77,500 tonnes of cane per day. The
company also produces green power from bagasse, a by-product of sugarcane crushing, with a cogeneration capacity of
278.47 MW. In addition, the company produces ethanol and alcohol from molasses, another by-product of sugarcane, with
a distillery capacity of 520 kilolitres per day. The company also converts waste products like ash and pressmud into bio-
potash granules and organic manure, which are used as agri-inputs for chemical free farming.

• We believe that BCML is well positioned to benefit from the favourable dynamics of the sugar industry in India and
globally. The company has a diversified revenue stream from sugar and its by-products, which reduces its dependence on
sugar prices and provides a hedge against volatility. The company has also invested in expanding its ethanol capacity to
meet the increasing demand for ethanol blending with petrol in India, which is expected to reach 20% by 2025. The
company's ethanol segment has higher margins and lower working capital requirements than sugar segment, which
improves its profitability and cash flow generation. The company's power segment also contributes to its earnings by
selling surplus power to the grid at attractive tariffs. The company's agri-inputs segment enhances its sustainability profile
by promoting eco-friendly practices and reducing carbon footprint.

• We estimate that BCML will report a revenue CAGR of 12% and an EBITDA CAGR of 15% over FY23-FY25, driven by higher
sugar production, higher ethanol sales volume and higher power generation. We expect the company's net profit to grow
at a CAGR of 15% over the same period, supported by improved operating leverage, lower interest cost and lower tax rate.
We value the company at 14x FY25E EPS of Rs. 35, which implies a price of Rs. 490 per share, representing an upside
potential.
Price chart of last 6 months/Nifty as comparison
Estimates of future sugar prices to support EPS
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