Outlook : Positive. Dalmia Bharat- Buy CMP: Rs 97 Target price : Rs 175 Upside: 80% Dwarikesh Sugar Buy CMP: Rs 193 Target price : Rs 325 Upside: 68%

Transcription

1 Dalmia Bharat- Buy CMP: Rs 97 Target price : Rs 175 Upside: 8% Dwarikesh Sugar Buy CMP: Rs 193 Target price : Rs 325 Upside: 68% Triveni Engineering Buy CMP: Rs 53 Target price : Rs 79 Upside: 49% Balrampur Chini- Accumulate CMP: Rs 5 Target price : Rs 116 Upside: 11% Sector Report Outlook : Positive Global Deficit Global sugar production in is expected to fall by 3 mn tonnes to 172 mn tonnes. Sugar consumption is expected to reach a 173 mn tonnes, reducing end season stock by 4 mn tonnes. Further, the International Sugar Organization (ISO) has raised the world sugar production deficit to 3.53 mn tonnes for from its earlier estimate of ~1 mn tonnes and 6 mt for Brazil, the world s largest sugar producer, is expected to have lower sugar production of ~35 mn tonnes (-9% YoY) on account of El Nino and mandatory ethanol conversion. This, along with fall in global sugar inventory to ~67 days (vs 75 days) is likely to keep international sugar prices stable to buoyant. Analysis of historical data suggests that whenever Indian and Global sugar industry fall into a deficit, sugar prices tend to jump both domestic and international market. Domestic Deficit Two deficit years of monsoon, Sugar Season (SS) and is likely to put pressure on sugar production (especially in Maharashtra) and reduce the excess supply, thereby supporting sugar prices. Further even in Sugar season 16-17, domestic production is expected to be impacted due to low reservoir levels. The situation in Uttar Pradesh Sugar mills in Uttar Pradesh are traditionally at a disadvantage to peers in rest of the country due to a higher sugarcane price and lower recovery. This year, on the back of rise in area under higher recovery varieties and a somewhat warmer winter, these mills have a lower cost of production compared to last year. The average recovery has touched an all-time high of.5-11% in SS 16 and expected to sustain at elevated level in near future. We expect significant improvement in profitability of sugar mills in this region. Ravikant Sangepag Research Analyst ravikants@systematixshares.com April 28 th 16 History to repeat During the previous two down-cycles (SS 4-5 & SS 9-), lower sugar output led to below-normal inventory days, resulting in significant increase in sugar prices. In SS 16-17, we expect a similar situation for sugar inventory on account of fall in sugar production to 23 mn tones. Government support to continue Supported by higher sugar prices (both in domestic and international markets) and the Government s backing to the industry (in the form of soft loans, Waiver of excise duty on ethanol, increasing ethanol blending from 5% to % and intent to link cane prices to sugar realization), the Indian sugar industry is recovering from its recent pain. Reduction in leverage Sugar industry is saddled with high debt due to poor monsoon for last two consecutive years. After interacting with management of covered companies, with improving operating and financial parameters, we believe that most of the companies will be able to reduce debt burden. Actual magnitude of consumption supply mismatch not fully priced-in We believe that the market hasn't factored in the impact of drought on 16/17 production in which we expect ~23 lac tonnes production in the upcoming season where the annual consumption will be ~252 lac tonnes. 1

2 Overview Global Industry Sugar is produced in over countries worldwide. In most years, over 7% of world sugar production is consumed domestically and the remaining is traded in the world. However, a significant share of this trade volume takes place under bilateral long-term agreements or on preferential terms. Since only a small proportion of world production is traded freely, small changes in production and government policies tend to have large effects on world sugar markets. As a result, sugar prices have been unstable in the world market. During late 5 and the first quarter of 6, world sugar price increased from about $.12/lb to over $.18/lb because of increased use of sugarcane for ethanol production in Brazil. World sugar price fell to $.12/lb in late 6 and $.11/lb by early 7 due to increased production in other exporting nations. The yearly average price was $.19/lb in 9 and increased to $.27/lb in and increased further to $.32/lb in 11. The stocks to use ratio has varied between 34% in 1968 and 17% in. The ICE (Intercontinental Exchange) No. 11 price follows an opposite relationship with the stocks to use ratio. When the stocks to use ratio is high (low), ICE prices are low (high). A decrease in the stocks to use ratio increased sugar price from $.8/lb in to $.27/lb in. Similar price increases occurred in and However, the current stocks to use ratio of 13.9% which has increased since, lowered the price of sugar. In 13, the ICE No. 11 sugar price dropped to $18./lb. By 14, the price dropped to $16.8/lb. Sugarcane is a perennial grass that is produced in tropical and subtropical climate zones. It matures in 12 to 16 months. Once the cane is harvested, the sucrose starts breaking down. Thus, sugarcane mills are located close to the cane fields to minimize transport costs and sucrose losses. Mills convert sugarcane into raw sugar which is shipped to refineries for further processing. In contrast to raw sugar producing mills, refineries are unconstrained by seasonal production patterns and operate throughout the year. Unlike sugarcane, sugarbeets are an annual crop of temperate climate zones. Because of disease problems, sugarbeets are always grown in crop rotations. Since sugarbeets are bulky and costly to transport, beet processing facilities are located close to production. In contrast to sugarcane, sugarbeets are directly processed into refined sugar. Raw sugar is produced only from sugarcane. Raw sugar and refined sugar are two different products. They are both traded internationally. Beet sugar producing countries export refined sugar, while cane sugar producing countries export either raw or refined sugar. In recent years, the share of raw sugar in total sugar exports has been about 6%. Major sugar producers in the world (by five year average production) Australia 2% Others 32% Brazil 22% China 8% United States 4% Thailand 6% India 16% European Union % 2 Per capita sugar consumption was highest in Cuba followed by Brazil and Australia. Brazil converts a substantial portion of sugar cane into ethanol. Per capita sugar consumption in the United States was 34 kg, which is above world average per capita consumption (21 kg). Per capita sugar consumption was lowest in China at 11 kg per capita, but that may increase substantially as per capita income increases. Annual global sugar consumption for the -14 periods was 164 million metric tons. The major sugar exporting countries were Brazil, Thailand, Australia, India and Guatemala. These countries accounted for 88% of global exports in Some years India exports sugar. Relatively few countries dominate world sugar exports, but imports are less concentrated. Major importing countries were China, Indonesia, USA, Europe and UAE. Imports by these countries accounted for about 56% of all sugar imports in

3 Trend in global sugar prices (cents/lbs) According to the United States Department of Agriculture (USDA), Brazil, the world s largest sugar producer, is expected to have lower sugar production of 35 million tonnes (9% YoY de-growth) on account of El Nino and mandatory ethanol conversion. This, coupled with fall in global sugar inventory is likely to keep international sugar prices stable to buoyant. Empirical evidence suggests that whenever Indian and Global sugar industry fall into a deficit, sugar prices tend to jump both domestically and internationally. On the back of higher global consumption estimates in south east Africa, extra raw sugar used by the biofuels industry in Thailand and expected stockpiling in India, the global output of sugar is expected to witness shortfall of 7.81 million tonnes in The highest marketing year shortfall in recent history, on an October-to-September basis, was the 15.97m tonnes seen in Situation in India After Brazil, India is the largest sugar producer in the world and it leads in sugarcane production. However, if alternative sweeteners such as khandsari (sort of raw sugar) and gur (jaggery) are included in the fold, then India would be the largest overall producer of sugar. Brazil accounts for approximately 22 percent of the global sugar production and India contributes almost 14 percent. In all, approximately Rs. 1,25 crore is invested in this industry and it also provides livelihood for close to 5 lakh workers. The industry also benefits the nearly 5 crore people who grow sugarcane in India. In India, the major sugar producing states are Maharashtra, Gujarat, Uttar Pradesh, Haryana, Tamil Nadu, Punjab, Karnataka, Bihar and Andhra Pradesh. As may be seen from the list above, sugar production is practiced all across India. However, the peninsular region has been a better performer than the north Indian states and there has also been a gradual shift from north to south for the sugar industry. One of the major reasons is the better conditions available for cultivation in the peninsular part. The sugar industry in India is also highly localized owing to problems in transporting sugarcane. The sugar industry can be divided into two sectors including organized and unorganized sector.

4 Sugar factories belong to the organized sector and those who produce traditional sweeteners fall into unorganized sector. Gur and khandsari are the traditional forms of sweeteners. Sugar Production in India India had produced 283 lac tonnes of sugar in compared to 244 lac tonnes in It is estimated that in the season, 252 lac tonnes of sugar will be consumed. ISMA estimates that due to the increased production in the year gone by, there will be a carryover stock of 8.5 lac tonnes. There will be 25 lac tonnes more than what is thought to be the standard requirement in these cases. It is expected that in 17, Indians will be consuming almost 255 lac tonnes of sugar. Maharashtra is traditionally the leader when it comes to sugar production in India. Before Maharashtra, Uttar Pradesh was the leader. There are several reasons as to why Maharashtra occupies this place in the pantheon of Indian states that produce sugar. The state has a longer crushing period compared to other states and its rate of recovery is also significantly higher. Maharashtra currently has almost 35 percent of the sugar mills operating in India and it accounts for nearly 35 percent of the entire sugar produced in India (for the period of Oct 15 to Feb 16). In fact, the sugar mills in Maharashtra are supposed to be the biggest in the country. Most of these mills are located at the river valleys in the western stretches of the Maharashtra Plateau. Ahmednagar is among the leading centre of sugar production along with Kolhapur, Pune, Satara, Nashik and Solapur. Import and Export of Indian The Indian government has a rather strict policy when it comes to import of sugar. During 14, it has raised the import duty from 15 percent to 4 percent with a view to discourage this side of the sugar trade and promote exports. Thanks to the increased import duty, refiners find it rather hard economically unfeasible to be precise to bring in sugar especially from countries such as Brazil, Pakistan and Thailand. For SS 15-16, the Indian government provides a subsidy amounting to Rs. 4, per tonne with the aim to promote exports. This is provided for raw sugar shipments, where the volume is around 14 lac tonnes. However, in spite of that, of late, Indian sugar industry has had a hard time in exporting raw sugar owing to the fact that prices have been consistently on a downward spiral. The situation is especially precarious at the market in New York, which is regarded as a benchmark. Deficit is expected to raise Sugar production in India is highly dependent on rainfall, as sugarcane is high water intensive crop hence low or untimely rainfall severely affects sugarcane output and thereby sugar production. In 4 and 5, India faced 14% and 1% shortfall in rainfall leading to fall in sugar production by 32% YoY and 7% YoY, respectively. The same scenario repeated in 9, when rainfall was 27% below normal and sugar production in India fell to 145 lac tonnes, a 45% drop compared to the previous year. In SS 3-4 and SS 4-5, sugar prices rose from INR14/kg to INR18/kg (up 29%). Again in SS9 and SS, fall in sugar production pushed sugar prices up by 127% from INR15/kg to INR 34/kg. India has had two consecutive rainfall deficit years. In 14 and 15, monsoon rainfall was 12% and 14% below normal, respectively. Consequently, sugar production is expected to fall significantly over the next two years and therefore sugar prices are likely to remain stable with an upward bias. According to ISMA, from the beginning of the season, from 1st October 15 to 29th February 16, sugar mills have produced lac tons of sugar, as compared to lac tons produced during the same period in SS During the current SS 15-16, out of 513 sugar mills which started operations, 7 have shut their operations by 29thFebruary 16. Last year, out of 517 sugar mills which were in operation between 1st October and 28th Feb. 15, 13 had shut their operations. In Maharashtra, 177 sugar mills have produced 7.4 lac tons of sugar till the end of February 16, as against lac tons produced in SS on the corresponding date. 71 sugar mills in the State have stopped their crushing operations by 29 th February 16 due to nonavailability of cane in their respective areas. About 6 of these 71 mills, which have closed their operations for the season, are from rain deficit areas of Maharashtra viz. Marathwada areas and Sholapur. Last year, only 3 three sugar mills had stopped crushing by 28th February 15. 4

5 Trend in domestic sugar production (Mn Tonnes) NCDEX M grade sugar spot prices ex Kolhapur (Rs/Quintal) Jul-15 Oct-15 Jan-16 Apr-16 Source: Bloomberg Governments initiatives to support sugar industry The government is working on a new subsidy scheme which is to be implemented in the current marketing year starting this month in order to boost export of surplus sugar and help mills clear dues of over Rs 12, crore to farmers. The new scheme is being worked out as the domestic glut situation is expected to continue in view of sugar stocks of 2 lac tonnes at the end of season. The sugarcane arrears, which stood at Rs 21, crore in April 15, have come down to Rs 12,248 crore at the end of the season on account of a number of government measures such as the soft loan, hike in import duty and raising ethanol blending with petrol to percent so as to infuse liquidity into the sugar sector. 25,, ,, 5, ,99 18,346 21,837 12,248 2,381 3,897 8,183 FY FY 11 FY 12 FY 13 FY 14 FY 15 2Q FY16 3 Arrears % of Payables In a major relief to sugar mills, the Centre has exempted ethanol produced from molasses from central value added tax (Cenvat). This will raise sugar mills realization by Rs 5 a litre to Rs a litre. This is the second major decision in favour of sugar mills after the government allowed four million tonnes of sugar exports on September 18. Meanwhile sugar mills facing surplus stocks and escalation of cane arrears have given a cautious welcome to the central government s decision to promote export of 4 lakh tonne sugar for the season. Fixing a quota for export before start of crushing season has been a demand of sugar mills. 5

6 Our recommendations Dalmia Bharat Sugar and Industries Ltd (DBSIL) Buy: The company has acquired a plant with 1,75 TCD capacity in Sangli (Maharashtra) in Feb 15 and is in the process of expanding capacity of Kolhapur facility from 5, TCD to 7,5 TCD. These additional capacities are expected to be fully operational in SS17. With increasing capacity and realization we expect revenue of DBSIL to grow at a CAGR of 18.6% from FY15 to FY17. We expect production in UP plants to remain flat in SS17 while owing to higher recovery, management is keen on quick production ramp-up in the Sangli-Kolhapur region. With increased contribution from Kolhapur plant, we expect overall recovery to expand in near future. We value the company at 8x its FY17E EPS of Rs 21.8 and recommend buy with a target of Rs. 175, an upside of 8% in 12 months. Dwarikesh Sugar Industries Ltd (DSIL) Buy: Dwarikesh turned PAT positive in 3Q FY16. With sustained recovery in sugar prices, we expect Dwarikesh sugar to continue its stellar performance in years to come. Sugar recovery in sugar mills in Uttar Pradesh have improved by around 1% (from 9% in FY15 to ~.5-11% in FY16 and are expected to remain at elevated level. With all of three plants located in cane rich areas in UP, we expect Dwarikesh to sustain profitability. With improving cash flows, management intend to reduce long term debt from current 25 Cr level to Cr in FY17. With reduction in Debt to Equity ratio, we expect DSIL to de-risk its business model in near future. We value the company at 7x its FY17E EPS of 46.5 and recommend buy with a target of Rs. 325, an upside of 68% in 12 months. Triveni Engineering and Industries Ltd (TEIL) - Buy: With a recovery in domestic sugar realizations, we expect profitability of TEIL s sugar division to improve. With pick-up in domestic industrial spending and huge export potential to GE Lufkin, we expect high-speed gear segment to grow at a CAGR of at least % from FY15 to FY17. TEIL s Waste Water Management segment reported a revenue and EBIT loss of Rs 198 Cr and Rs -4 Cr respectively in FY15. With continued traction in the business, we expect the segment to breakeven at EBIT level in FY16 and to report EBIT of Rs 36 Cr in FY 17. TEIL has approved a new arrangement of demerging the sugar business. Under the proposed demerger, the Engineering business (Gear + Water) will be held under TEIL while the Sugar business will be housed under Triveni Industries Ltd (TIL). Further, TIL comprises 2 sugar plants + Co-gen + Distillery while its subsidiary (99.9%) called Triveni Sugar Ltd. (TSL) has 5 sugar plants. TIL will get listed on NSE/ BSE and will issue shares to shareholders of TEIL in the ratio of 1:1. We believe simplified business structure will help to unlock shareholders value by demerger of sugar and engineering business. In addition to that TEIL also holds 7.2 Cr shares of Triveni Turbines which translates to Rs 21/sh after considering holding company discount. We have valued TEIL business at 8x its FY17 EPS of 7.3 translating to total value of Rs 79/sh, an upside of 49% from current level. Balrampur Chini Mills Ltd (BCML) -Accumulate: The company reported recovery of upwards of.5% in 9M FY16. Management expects recovery levels to remain elevated at ~.5% going ahead. With improving prospects of sugar industry, we expect BCML to report revenue of Rs 2,64 Cr and Rs 3,166 Cr in FY16 and FY17 respectively. With higher bagasse next season, power segment is expected to register robust performance. W expect segment to report revenue of Rs 243 Cr and Rs 271 Cr in FY16 and FY17 respectively. Apart from these things, we expect integrated players like BCML to benefit immensely due to improving ethanol dynamics as the central government is mulling to go after ethanol production in a big way. Considering leadership position of BCML, we value the company at x its FY17E EPS of Rs 11.6 and recommend accumulate with a target of Rs. 116, an upside of 11% in 12 months Risk to our call Favourable change in weather could increase supply of sugar cane and sugar produced thereby putting pressure on sugar prices. Tinkering of relevant policy measures by government like import duty, export subsidy and imposing stock limits may affect profitability and sentiments. Higher than expected increase in sugarcane cost in could hurt profitability. Financial Snapshot: Company Name CMP (Rs.) Target Price (Rs.) Upside (%) Market Cap (Rs. Cr.) PAT (Rs. Cr.) EPS (Rs.) PE (x) FY16E FY17E FY16E FY17E FY16E FY17E Dalmia Bharat Sugar % Dwarikesh Sugar % Triveni Engg & Ind % Balrampur Chini %

7 Dalmia Bharat Sugar and Industries Ltd. Industry Report Rating: Buy Date 28 April 16 CMP (Rs.) 97 Target (Rs.) 175 Potential Upside 8% BSE Sensex 26,64 NSE Nifty 7,98 Scrip Code Bloomberg DCB IN Reuters DLMI.BO BSE Group B BSE Code 597 NSE Symbol DALMIASUG Market Data Market Cap. 786 Equity Sh. Cap. (Rs Cr) Wk High/Low 118/17 Avg. Quarterly Volume 3,56,85 Face Value (Rs.) 2 Shareholding Pattern (As on 31 st Mar 16) FII 1.3 DII 3.83 Promoters Public & Others.7 Total. Comparative Price Chart Apr-15 Jul-15 Oct-15 Jan-16 DBSIL Sensex Ravikant Sangepag Research Analyst ravikants@systematixshares.com Dalmia Bharat Sugar and Industries Limited (DBSIL) is one of the leading producers of sugar in Uttar Pradesh having five plants with total cane crushing capacity of 31,75 TCD. The integrated sugar plants also have a capacity to produce 79 MW of bagasse-based power of which around 55 MW is exported to the state grid. The company also has wind farms of 16.5 MW capacity located in Tamil Nadu. DBSIL forayed into Maharashtra in 13 and currently has 2 plants with crushing capacity of 9,25 TCD and cogen power of 23 MW. It has also set up 6 KLPD distillery which is expected to be fully operational in FY17. Dalmia Bharat Sugar and Industries Limited was incorporated in 1951 and is based in New Delhi, India. The company has acquired a plant with 1,75 TCD capacity in Sangli (Maharashtra) in February 15 and has expanded capacity of Kolhapur facility from 5, TCD to 7,5 TCD. Additional capacity is expected to be operational in FY17. With increasing capacity and realization we expect revenue of DBSIL to grow at a CAGR of 18.6% from FY15 to FY17. We expect production in UP plats to remain flat in FY17 while owing to higher recovery, management is keen on quick production ramp-up in the Sangli-Kolhapur region. With increased contribution from Kolhapur plant, we expect overall recovery to expand in near future. Increasing sugar capacity coupled with improvement in realization to aid growth: DBSIL will invest about Rs 15 Cr on expansion of existing sugar plant at Kolhapur in Maharashtra. The company has five sugar plants in Uttar Pradesh and Maharasthra with cane crushing capacity of 29,25 MT. Its power co-generation and distilleries capacities at these plants are 94 MW and 1 KLPD. The cane crushing capacity in Kolhapur is being expanded to 7,5 TCD from the current 5, TCD, while co-generation capacity to 26 MW from current 15 MW. That apart, Dalmia Sugar is setting up a new distillery with capacity of 6 KLPD in Kolhapur. Additional capacity is expected to be operational in SY With increasing capacity and realization we expect revenue of DBSIL to grow at a CAGR of 18.6% from FY15 to FY17. Newly acquired Sangli plant to add to revenue: DBSIL has acquired Ninaidevi SSK, a sick sugar cooperative in Maharashtra's Sangli district, for Rs crore through auction process in February 15. The unit acquired has a capacity of 1,75 TCD. Management said that the company is in the process of stabilizing and consolidating its acquisitions, with no plans at present for further expansion. This unit has not been in operation since 6-7 and management is in the process of overhaul of the same and expects to be fully operational during SS17. Expansion in Kolhapur plant to improve recovery further: The Kolhapur-Sangli belt is known for highest sugar recovery of more than 12% in the country, compared to about 11.5% recovery in the state as a whole and mere -.5% in UP sugar mills. Recovery in Kolhapur facility is higher at ~13% compared to ~.5% for plants in Uttar Pradesh. Currently operating capacity in Kolhapur and Sangli contributes 18.2% to total capacity. With additional 2,5 TCD in Kolhapur and 1,75 TCD in Sangli, contribution of this high recovery capacity is expected to increase to ~29%. We expect production in UP plats to remain flat in FY17 while owing to higher recovery, management is keen on production ramp-up in Sangli-Kolhapur region. With increased contribution from Kolhapur plant, we expect overall recovery to expand. Valuation & Outlook: At CMP INR 97, the stock trades at P/E of 12.6x and 4.4x for FY16E and FY17E earnings of Rs 7.7 and 21.8, respectively. We have found that historically in a similar scenario, the stock trades ~8x P/E, with estimated EPS of Rs 21.8 in FY17E and multiple of 8x, we arrived at target price of Rs 175 which translates into 8% upside potential from these levels. Particulars Sales EBITDA EBITDAM (%) PAT FY14 1, FY15 1, FY16E 1, FY17E 1, PATM (%) EPS (Rs.) BVPS (Rs.) P/E (x) P/BV (x)

8 Story in charts Trend in revenue Revenue is expected to grow at CAGR of 18.6% from FY15 to FY17 2, 1,5 1, , ,192 1,15 1, (3.5) FY 13 FY 14 FY 15 FY 16E FY 17E - Revenue (Rs Cr) Growth (%) Trend in EBITDA EBITDAM is expected to reach.3% in FY17 compared to 9.8% in FY FY 13 FY 14 FY 15 FY 16E FY 17E EBITDA (Rs Cr) EBITDAM (%) PAT margin to reach.9% in FY17 compared to.1% in FY15 Trend in PAT ROE (%) FY 13 FY 14 FY 15 FY 16E FY 17E PAT (Rs Cr) PATM (%) Growth with minimal CAPEX requirement to boost ROE to 28.9% in FY17 compared to.3% in FY FY 13 FY 14 FY 15 FY 16E FY 17E

9 Company Background DBSIL is one of the leading producers of sugar in Uttar Pradesh having five plants with total cane crushing capacity of 31,75 TCD. The integrated sugar plants also have a capacity to produce 79 MW of bagasse-based power of which around 5 MW is exported to the state grid. The company also has wind farms of 16.5 MW capacity located in Tamil Nadu. DBSIL forayed into Maharashtra in 13 and currently has 2 plants with crushing capacity of 9,25 TCD and cogen power of 23 MW. It has also set up 6 KLPD distillery which is expected to be fully operational in FY17. DBSIL through its % subsidiary, is incubating a MW solar power plant in Rajasthan. It has an ethanol capacity of 9 KLPD which also produces organic fertilizer (bio-compost). DBSIL started operations in 1939 as a cement manufacturer with a capacity of 25 tons per day and was originally incorporated as Dalmia Cement. Its capacity had grown to 9 MTPA in in which as per scheme of arrangement its cement business, refractory business, thermal power business and certain other businesses were demerged into a separate entity Dalmia Bharat Enterprises Ltd. Post the demerger, Sugar and ancilliary business continued in this company which was renamed DBSIL. Capacity Capacities Sugar (TCD) 27,5 27,5 27,5 31,75 Ramgarh - 7,5 7,5 7,5 Jawaharpur - 7,5 7,5 7,5 Nigohi - 7,5 7,5 7,5 Kolhapur - 5, 5, 7,5 Sangli ,75 Power Produced (MW) Ramgarh Jawaharpur Nigohi Kolhapur Sangli Power Saleable (MW) Distillary (KLPD) Ramgarh Jawaharpur Nigohi Kolhapur Sangli Key Management Personnel : Key Management personnel Mr. J S Baijal Mr. Gautam Dalmia Mr. Jai Hari Dalmia Mr. Anil Kataria Designation Chairman Managing Director Vice Chairman CFO

10 FINANCIAL PERFORMANCE PROFIT & LOSS (Rs Cr) CASH FLOW (Rs Cr) Particulars FY14 FY15 FY16E FY17E Particulars FY14 FY15 FY16E FY17E Revenue 1,192 1,15 1,212 1,618 Cash from operating act Raw material cost ,32 Cash from investing act Other Expences Cash from financing act. 186 (88) 2 (89) EBITDA Net Change in Cash 21 (27) Depreciation Other Income RATIO ANALYSIS EBIT Particulars FY14 FY15 FY16E FY17E Interest Expenses General Profit Before Tax EPS Tax () (1) 7 44 BVPS PAT ROE.7%.3% 12.7% 28.9% WC as % of Sales 29.8% 27.9% 29.1% 24.4% BALANCE SHEET (Rs Cr) Growth Particulars FY14 FY15 FY16E FY17E Revenue 19.4% -3.5% 5.4% 33.5% Share Capital EBITDA -28.1% 4.7% 29.8% 124.5% Reserves & Surplus PAT -83.4% -51.1% 492.9% 183.% Total Shareholder funds Profitability Non Current Liabilities EBITDA Margin 9.% 9.8% 12.1%.3% Longterm Borrowings EBIT Margin 6.6% 6.8% 11.7% 17.9% Deferred Tax Liabilities PAT Margin.3%.1% 5.2%.9% Other LT Liabilities Stability Current Liabilities Debt/Equity Trade Payables Current Ratio Other Current Liabilities Interest Coverage ST Borrowings ST Provisions TOTAL LIABILITIES 1,718 1,834 1,835 2,184 Non Current Assets Net Block CWIP NC Investments Current Assets Inventories Sundry Debtors Cash and Bank ST Loans and Advances TOTAL ASSETS 1,718 1,834 1,835 2,184

11 Dwarikesh Sugar Industries Ltd. Industry Report Rating: Buy Date 28 April 16 CMP (Rs.) 193 Target (Rs.) 325 Potential Upside 68% BSE Sensex 26,64 NSE Nifty 7,98 Scrip Code Bloomberg DSIL IN Reuters DWAR.BO BSE Group B BSE Code 5326 NSE Symbol DWARKESH Market Data Market Cap. 315 Equity Sh. Cap. (Rs Cr) Wk High/Low 225/ Avg. Quarterly Volume 2,72,164 Face Value (Rs.) Shareholding Pattern (As on 31 st Mar 16) FII.3 DII 2.74 Promoters Public & Others Total. Comparative Price Chart Apr-15 Jul-15 Oct-15 Jan-16 DSIL Sensex Ravikant Sangepag Research Analyst ravikants@systematixshares.com Dwarikesh Sugar Industries Limited (DSIL) is an Uttar Pradesh based integrated conglomerate primarily engaged in the manufacture of sugar and allied products. The Company is engaged in diversified fields such as sugar manufacturing, power and ethanol/industrial alcohol production. The Company has three sugar manufacturing units, out of which two units are located in Bijnor District of Uttar Pradesh (UP) and one Sugar Unit in Bareilly District, UP. The Company manufactures and sells three grades of sugar viz. L, M and S and sells sugar in Bulk to wholesalers / agents. The Company has a power plant with a capacity of 17 Mega Watts (MW) at its Dwarikesh Nagar Unit and is using nine MW for captive consumption in manufacture of sugar and balance eight MW is supplied to Uttar Pradesh Power Corporation Limited (UPPCL). The Company also has a capacity of 86 MW. The Company has a capacity of 3 KLPD distilleries for the manufacture of Industrial Alcohol and Ethanol. Dwarikesh turned PAT positive in 3Q FY16. With sustained recovery in sugar prices, we expect Dwarikesh sugar to continue its stellar performance in years to come. Sugar recovery in sugar mills in Uttar Pradesh have improved by around 1% (from 9% in FY15 to ~.5-11% in FY16 and are expected to remain at elevated level. With all of three plants located in cane rich areas in UP, we expect Dwarikesh to sustain profitability. With improving cash flows, management intend to reduce long term debt from current 25 Cr level to Cr in FY17. With reduction in Debt to Equity ratio we expect DSIL to derisk its business model in near future. Sustained recovery in sugar prices to fuel the growth: Net profit of Dwarikesh Sugar Industries reported to Rs 2.84 crore in the quarter ended December 15 as against net loss of Rs crore during the previous quarter ended December 14. Sales rose 37.68% to Rs 2.9 crore in the quarter ended December 15 as against Rs crore during the previous quarter ended December 14. With sustained recovery in sugar prices, we expect Dwarikesh sugar to continue its stellar performance in years to come. Key beneficiary of improvement in recovery Uttar Pradesh: Dwarikesh operates three plants in Uttar Pradesh with combined cane crushing capacity of 21,5 tonnes crushed per day. On the back of change in cane varieties and suitable weather, sugar mills in UP have reported significant improvement in recovery (~9.5% in FY15 to.5-11% in FY16). Management expects recovery to remain at elevated level. We expect UP mills to have a lower cost of production compared to last year, as the cane price is unchanged and and recovery is higher. With all of three plants located in cane rich areas in UP, we expect Dwarikesh to sustain profitability. Debt reduction on cards : With the long term debt of Rs 25 crore the company s total Debt to Equity ratio stands a 3.3x in FY16E, With improving financials and free cash flow, the management s aim is to reduce to Rs crore by end of next financial year. We expect the Debt to Equity ratio for the company to decline to 1.8x in FY17. With reduction in Debt to Equity we expect de-risking of business model of Dwarikesh in the near future. Valuation & Outlook: At CMP Rs 193, the stock trades at P/E of 4.2x FY17E earnings of Rs 46.5, We have found that historically in a similar scenario, the stock trades ~7x P/E, with estimated EPS of Rs 46.5 in FY17E and multiple of 7x, we arrived at target price of Rs 325 which translates into 68% upside potential from these levels. Particulars Sales EBITDA EBITDAM (%) PAT 13 (Sep) (19) (2) NA 2.6 FY15 (18M) 1, (17) (1) NA 3. FY16E FY17E PATM (%) EPS (Rs.) BVPS (Rs.) P/E (x) P/BV (x)

12 Story in charts Trend in revenue 1, 1, 1, FY (Sep) FY 15 (18M) FY 16E FY 17E Trend in EBITDA EBITDAM is expected to reach % in FY17 compared to 8.2% in FY FY (Sep) FY 15 (18M) FY 16E FY 17E EBITDA (Rs Cr) EBITDAM (%) PAT margin to reach 8.9% in FY17 Trend in PAT ROE (%) (1.6) (2.1) (1.5) FY (Sep) FY 15 (18M) FY 16E FY 17E (11) (19) (17) PAT (Rs Cr) PATM (%) Growth with minimal CAPEX requirement to boost ROE to 43.6% in FY17 compared to -15% in FY (8.4) (15.1) (15.) FY (Sep) FY 15 (18M) FY 16E FY 17E

13 Company Background Dwarikesh Sugar Industries Limited (DSIL) is an based integrated conglomerate primarily engaged in the manufacture of sugar and allied products. The Company is engaged in diversified fields such as sugar manufacturing, power and ethanol/industrial alcohol production. The Company has three sugar manufacturing units, out of which two units are located in Bijnor District of Uttar Pradesh (UP) and one Sugar Unit in Bareilly District, UP. The Company manufactures and sells three grades of sugar viz. L, M and S and sells sugar in Bulk to wholesalers / agents. The Company has a power plant with a capacity of 17 Mega Watts (MW) at its Dwarikesh Nagar Unit and is using nine MW for captive consumption in manufacture of sugar and balance eight MW is supplied to Uttar Pradesh Power Corporation Limited (UPPCL). The Company also has a capacity of 86 MW. The Company has a capacity of 3 KLPD distilleries for the manufacture of Industrial Alcohol and Ethanol. Production Units Unit Tehsil District State Dwarikesh Nagar (DN) Nagina Bijnor Uttar Pradesh Dwarikesh Puram (DP) Dhampur Bijnor Uttar Pradesh Dwarikesh Dham (DD) Faridpur Bareilly Uttar Pradesh Capacity Matrix Division DN DP DD Total Sugar (TCD) 6,5 7,5 7,5 21,5 CoGen (MW) CoGen Exp (MW) Distillary (KLPD) Breakup of Revenue (FY 16E) Alcohol 9% CoGen % Sugar 81% Key Management Personnel : Key Management personnel Mr. G R Morarka Mr. Alok Lohia Mr. B P Dixit Mr. R S Thakur Designation Managing Director GM Finance Vice President Chief General manager

14 FINANCIAL PERFORMANCE PROFIT & LOSS (Rs Cr) CASH FLOW (Rs Cr) Particulars 13 (Sep) FY 15 (18M) FY 16E FY 17E Particulars 13 (Sep) FY 15 (18M) FY 16E FY 17E Revenue 928 1, Cash from operating act. 2 (21) Raw material cost Cash from investing act Other operating expenses Cash from financing act. (85) 29 (23) (6) EBITDA Net Change in Cash 1 (1) Depreciation Other Income RATIO ANALYSIS EBIT Particulars 13 (Sep) FY 15 (18M) FY 16E FY 17E Interest Expenses General Profit Before Tax (32) (27) 4 95 EPS Tax (13) () 8 19 BVPS PAT (19) (17) ROE -15.1% -15.% 26.7% 43.6% WC as % of Sales 13.5% 16.5% 28.9% 15.6% BALANCE SHEET (Rs Cr) Growth Particulars 13 (Sep) FY 15 (18M) FY 16E FY 17E Revenue 32.8% 22.5% -33.1% 12.1% Share Capital EBITDA -37.5% 58.7% 31.7% 38.5% Reserves & Surplus PAT 71.3% -13.1% -29.6% 136.8% Total Shareholder funds Profitability Non Current Liabilities EBITDA Margin 6.3% 8.2% 16.2%.% Longterm Borrowings EBIT Margin 4.2% 4.3% 12.3% 16.3% Deferred Tax Liabilities PAT Margin -2.1% -1.5% 4.2% 8.9% Other LT Liabilities Stability Current Liabilities Debt/Equity Trade Payables Current Ratio Other Current Liabilities Interest Coverage ST Borrowings ST Provisions TOTAL LIABILITIES 761 1, Non Current Assets Net Block CWIP - NC Investments Current Assets Inventories Sundry Debtors Cash and Bank ST Loans and Advances TOTAL ASSETS 761 1,

15 Triveni Engineering and Industries Ltd. Industry Report Rating: Buy Date 28 April 16 CMP (Rs.) 53 Target (Rs.) 79 Potential Upside 49% BSE Sensex 26,64 NSE Nifty 7,98 Scrip Code Bloomberg TRE IN Reuters TREI.BO BSE Group B BSE Code NSE Symbol TRIVENI Market Data Market Cap Equity Sh. Cap. (Rs Cr) Wk High/Low 56/14 Avg. Quarterly Volume 17,79,592 Face Value (Rs.) 1 Shareholding Pattern (As on 31 st Mar 16) FII 4.26 DII 2.66 Promoters Public & Others Total. Comparative Price Chart Apr-15 Jul-15 Oct-15 Jan-16 Ravikant Sangepag Research Analyst ravikants@systematixshares.com Particulars TEIL Sales Sensex EBITDA Triveni Engineering & Industries Limited (TEIL) is a focused player in the areas of sugar and engineering. The Company is one of the largest sugar manufacturers in India and the market leader in its engineering businesses comprising high speed gears and gearboxes for steam and gas turbines, and water treatment solutions. In the gear business, TEIL commands about 7% market share in complete high speed gear market across applications up to 7 MW capacity and speeds of 7, rpm. TEIL has developed its own technology for high speed gear boxes upto 7.5 MW and for hydel gearbox range upto 6 MW. In the Waste Water Solutions segment, TEIL has technology association with world s leading technology providers for various products, process & solutions such as Ultra filtration (UF), Reverse Osmosis (RO), Moving Bed Bio Reactor (MBBR) etc. With a recovery in domestic sugar realizations, we expect profitability of TEIL s sugar division to improve. With pick-up in domestic industrial spending and huge export potential to GE Lufkin, we expect high-speed gear segment to grow at a CAGR of at least % from FY15 to FY17. TEIL s Waste Water Management segment reported a revenue and EBIT loss of Rs 198 Cr and Rs -4 Cr respectively in FY15. With continued traction in the business, we expect the segment to breakeven at EBIT level in FY16 and to report EBIT of Rs 36 Cr in FY 17. TEIL has approved a new arrangement of demerging the sugar business. We expect this demerger to result in unlocking and maximization shareholders value. We also expect that this will facilitate strategic partnerships and offer flexibility in fund raising for future growth. Sugar business - At the cusp of a major turnaround: With sugar cane crushing of ~5mn MTPA and sugar production of more than 5, MTPA in FY16E, TEIL is one of the largest sugar manufacturers in the country. The company s sugar mills are located in fertile and irrigated cane rich areas of western Uttar Pradesh. With 7 sugar mills, 6 co-generation units and 1 distillery spread over 8 locations in Uttar Pradesh, TEIL engage with over 25, farmers. Triveni accounts for 8% of total sugarcane grown in UP. Weightage of Cane crush by the Company is equivalent to 6.7% while sugar output is equivalent to 6.9% in the State. Sugar and allied (Distillery and co generation) products contribute ~84% to revenue. We believe that TEIL will be key beneficiary of uptick in sugar industry Engineering segment set to ride on industrial CAPEX: With a market share of 7% TEIL is the domestic market leader, in designing and manufacturing of high speed gearboxes in the range of 7.5 MW 62 MW. The company s Strategic Supply Agreement to export high-speed gears to GE Lufkin has strengthened TEIL s global footprint. The company has already invested Rs 7 Cr for the same. We believe that TEIL is technologically a strong player to grab upcoming opportunities in the Waste Water Management segment (market size Rs ~11, Cr), especially the Namami Gange (Rs, Cr) project. As a result, the Engineering segment is expected to deliver revenue CAGR of ~% from FY15 to FY17, aided by the recovery in the domestic industrial spending and huge export potential to GE Lufkin. Demerger of Engineering Business to unlock shareholders value: Recently, TEIL s board of directors has approved a new arrangement of demerging the sugar business. Under the proposed demerger, the Engineering business (Gear + Water) will be held under TEIL while the Sugar business will be housed under Triveni Industries Ltd (TIL). Further, TIL comprises 2 sugar plants + Co-gen + Distillery while its subsidiary (99.9%) called Triveni Sugar Ltd. (TSL) has 5 sugar plants. TIL will get listed on NSE/ BSE and will issue shares to shareholders of TEIL in the ratio of 1:1. Valuation & Outlook: We believe simplified business structure will help to unlock shareholders value by demerger of sugar and engineering business. In addition to that TEIL also holds 7.2 Cr shares of Triveni Turbines which translates to Rs 21/sh after considering holding company discount. We have valued TEIL business at 8x its FY17 EPS of 7.3 translating to total value of Rs 79/sh, an upside of 49% from current level. EBITDAM (%) PAT FY14 3, (176) (5.6) NA 1.6 FY15 2,79 () (.) (152) (7.3) NA 2.1 FY16E 1, FY17E 1, PATM (%) EPS (Rs.) BVPS (Rs.) P/E (x) P/BV (x)

16 Story in charts Trend in revenue 3,5 3, 2,5 3,176 2, 1,5 1, 2,79 1,69 1,887 5 FY 14 FY 15 FY 16E FY 17E Trend in EBITDA EBITDAM is expected to reach.4% in FY17 compared to % in FY (.) () FY 14 FY 15 FY 16E FY 17E EBITDA (Rs Cr) EBITDAM (%) Trend in PAT PAT margin to reach % in FY ROE (%) FY 14 FY 15 FY 16E FY 17E (5.6) (7.3) (176) (152) PAT (Rs Cr) PATM (%) Growth with minimal CAPEX requirement to boost ROE to 24.4% in FY17 compared to -.3% in FY FY 14 FY 15 FY 16E FY 17E (21.) (.3) -3

17 Company Background Triveni Engineering & Industries Limited (TEIL) is a focused player in the areas of sugar and engineering. The Company is one of the largest sugar manufacturers in India and the market leader in its engineering businesses comprising high speed gears, gearboxes, and water treatment solutions. Sugar Business With 7 sugar mills, 6 co-generation units and 1 distillery spread over 8 locations in Uttar Pradesh, TEIL engage with over 25, farmers. Triveni accounts for 8% of total sugarcane grown in UP. Weightage of Cane crush by the Company is equivalent to 6.7% while sugar output is equivalent to 6.9% in the State. TEIL operates One of the largest single stream molasses based distillery in the country located at Muzaffarnagar. The plant is Strategically located in close proximity to two of its largest sugar units viz. Khatauli and Deoband, the distillery procures consistent supply of captive raw material. The distillery has a flexible manufacturing process allowing it to produce Extra Neutral Alcohol (ENA), Rectified Spirit (RS), Special Denatured Spirit (SDS) & Ethanol which are renowned for their high quality. Gear Business Triveni is in the business of design, manufacture and marketing of customised gears and gearboxes (both high speed and niche low speed gears) having a state-of-the-art design and manufacturing facility at Mysore conforming to international standards. TEIL commands about 7% market share in complete high speed gear market across applications up to 7 MW capacity and speeds of 7, rpm. TEIL has own developed technology for high speed gear boxes upto 7.5 MW and for hydel gearbox range upto 6 MW. Range above 7.5 MW-62 MW is manufactured using technology licensed from Lufkin, USA. TEIL s High Speed Gears product range includes all Steam Turbine gear boxes, gear boxes for compressors and load gear boxes for gas turbines. Geographies extended to cover major markets in South East Asia such as Malaysia, Indonesia, Singapore, Thailand with the possibility of enhancing territories in the future. Niche engineered-toorder high technology low speed gear applications with Lufkin for four industrial segments viz., Rubber & Plastics, Metals and Steel, Marine and Coal pulverizer application in the thermal power plants. Water Business TEIL has Technology association with world s leading technology providers for various products, process & solutions such as Ultra filtration (UF), Reverse Osmosis (RO), Moving Bed Bio Reactor (MBBR) etc. and has one of the widest ranges of products & technologies offered in the Indian Market. Indigenous Product lines include clarifiers, aerators, filters, membrane solutions, dewatering equipment and high purity water systems Breakup of Revenue (FY 15) Distillery, 7% Co-Gen, 7% Gears, 4% Water, 9% Other, 3% Sugar, 7% Key Management Personnel : Key Management personnel Mr. Dhruv M. Sawhney Mr. Nikhil Sawhney Mr. Suresh Taneja Mr. Sameer Sinha Designation Chairman Vice Chairman and Managing Director Group CFO Corporate Planning & Sugar Business Group Coproducts

18 FINANCIAL PERFORMANCE PROFIT & LOSS (Rs Cr) CASH FLOW (Rs Cr) Particulars FY14 (18M) FY15 FY16E FY17E Particulars FY15 FY16E FY17E Revenue 3,176 2,79 1,69 1,887 Cash from operating act. 7 (16) 258 Raw material cost 2,371 1,642 1,224 1,348 Cash from investing act. 25 (18) 96 Other operating expenses Cash from financing act. (69) (2) (163) EBITDA 9 () Net Change in Cash (25) () () Depreciation Other Income RATIO ANALYSIS EBIT (11) (47) Particulars FY15 FY16E FY17E Interest Expenses General Profit Before Tax (191) (169) EPS Tax (15) (17) - 47 BVPS PAT (176) (152) ROE -.3% 2.9% 24.4% WC as % of Sales 34.3% 42.4% 31.7% BALANCE SHEET (Rs Cr) Growth Particulars FY14 (18M) FY15 FY16E FY17E Revenue -34.5% -22.6% 17.3% Share Capital EBITDA NA NA 1.4% Reserves & Surplus PAT NA NA 881.2% Total Shareholder funds Profitability Non Current Liabilities EBITDA Margin.% 11.9%.4% Longterm Borrowings EBIT Margin -2.3% 8.7% 17.7% Deferred Tax Liabilities PAT Margin -7.3% 1.2%.% Other LT Liabilities Stability Current Liabilities Debt/Equity Trade Payables Current Ratio Other Current Liabilities Interest Coverage ST Borrowings ST Provisions TOTAL LIABILITIES 3, 2,96 2,494 2,757 Non Current Assets Net Block CWIP NC Investments Current Assets Inventories 1,42 1,234 1, 1,196 Sundry Debtors Cash and Bank ST Loans and Advances TOTAL ASSETS 3, 2,96 2,494 2,757 *revenue and cost figures doesnot include contribution of non sugar business

19 Balrampur Chini Mills Ltd. Industry Report Rating: Accumulate Date 28 April 16 CMP (Rs.) 5 Target (Rs.) 116 Potential Upside 11% BSE Sensex 26,64 NSE Nifty 7,98 Scrip Code Bloomberg BRCM IN Reuters BACH.BO BSE Group A BSE Code 538 NSE Symbol BALRAMCHIN Market Data Market Cap. 2,573 Equity Sh. Cap. (Rs Cr) Wk High/Low 115/33 Avg. Quarterly Volume 31,99,581 Face Value (Rs.) 1 Shareholding Pattern (As on 31 st Mar 16) FII DII Promoters 4.83 Public & Others Total. Comparative Price Chart Apr-15 Jul-15 Oct-15 Jan-16 BCML Ravikant Sangepag Research Analyst ravikants@systematixshares.com Sensex Balrampur Chini Mills Limited (BCML) was incorporated in Today, BCML is one of India s largest and most respected private sugar mills. It has a cumulative sugar manufacturing capacity of 79 tonnes per day. It has invested in the distillery business with a cumulative capacity of 3 kilolitres per day. It has invested in bagasse-based cogeneration power facilities with a saleable power capacity of MW. BCML is headquartered in Kolkata, West Bengal. The Company s 11 manufacturing units are located in Balrampur, Babhnan, Tulsipur, Haidergarh, Akbarpur, Rauzagaon, Mankapur,Kumbhi, Gularia, Maizapur and Khalilabad in Uttar Pradesh, India. Having started its operations four decades ago, BCML is now one of India s largest integrated sugar mills and most efficient sugar producers in the country is best placed to capitalize on the positive structural changes witnessed by the industry. Improving ethanol dynamics and robust balance sheet will aid profitability. The company reported recovery of upwards of.5% in 9M FY16. Management expects recovery levels to remain elevated at ~.5% going ahead. With improving prospects of sugar industry, we expect BCML to report revenue of Rs 2,64 Cr and Rs 3,166 Cr in FY16 and FY17 respectively. With higher bagasse next season, power segment is expected to register robust performance. We expect the power segment to report revenue of Rs 243 Cr and Rs 271 Cr in FY16 and FY17 respectively. Apart from these things, we expect integrated players like BCML to benefit immensely due to improving ethanol dynamics as the central government is mulling to go after ethanol production in a big way. Sugar segment to continue driving profitability: Performance of sugar segment remained impressive in 3Q FY16 on the back of to improving prospects for the industry. BCML s Sugar segment's revenue grew by 6.6% to Rs 785 Cr, contributing 92.5% to revenues, mainly driven by 9.9% surge in volumes. Sugar recovery had improved by 1.7% YoY in Q3FY16 to.5% on the back of better weather and variety of cane. Realizations have improved sharply sequentially by ~12% to Rs 27/kg in Q3FY16. Profitability for the segment improved as it reported EBIT of Rs 26 Cr. Management expects recovery levels to remain elevated at ~.5% going ahead. With improving prospects of sugar industry, we expect BCML to report revenue of Rs 2,64 Cr and Rs 3,166 Cr in FY16 and FY17 respectively. Increasing power prices to boost profitability: Co-Generation business contributed ~% to total revenue in FY15. The revenue from the segment has grown at a CAGR of ~14% from FY13 to FY15. Realization from bagasse based sales remained high at Rs 4.8/unit in 3Q FY16 compared to ~Rs 4.2 in FY15. Management expects rates to remain elevated in near future. With higher bagasse next season, power segment is expected to register robust performance. We expect segment to report revenue of Rs 243 Cr and Rs 271 Cr in FY16 and FY17 respectively. Government's thrust on ethanol blending program to benefit distillery segment: Government's thrust on ethanol blending program continued to benefit BCML as its sales volumes of Ethanol in Q3FY16 surged by 2.3x to 14,9 kl and realizations witnessed an escalation of 1.8%. Ethanol prices have improved to INR 45/ltr as government has exempted ethanol from Cenvat. BCML already has won bids to supply ~7 mn ltr of ethanol over the next 12 months. We expect integrated players like BCML to benefit immensely due to improving ethanol dynamics as the central government is mulling to go after ethanol production in a big way. Particulars Sales EBITDA Valuation & Outlook: At CMP Rs 5, the stock trades at PE of 19.5x and 9x for FY16E and FY17E earnings of Rs. 5.4 and Rs 11.6, respectively. BCML, being leader in Indian sugar industry, shall command higher P/E multiple as compared to its peers. With estimated EPS of Rs 11.6 in FY17E and multiple of X, we arrived at target price of Rs 116 which translates into 11% upside potential from these levels. EBITDAM (%) PAT FY14 2, FY15 2, (58) (1.9) NA 2.3 FY16E 2, FY17E 3, PATM (%) EPS (Rs.) BVPS (Rs.) P/E (x) P/BV (x)

20 Story in charts Trend in revenue 3,5 3, 2,5 2, 1,5 1, (18.6) (12.8) 3,275 2,665 2,987 2,64 3,166 FY 13 FY 14 FY 15 FY 16E FY 17E Revenue (Rs Cr) Growth Trend in EBITDA EBITDAM is expected to reach 16.3% in FY17 compared to 4.1% in FY FY 13 FY 14 FY 15 FY 16E FY 17E 15 5 EBITDA (Rs Cr) EBITDAM (%) PAT margin to reach 9% in FY17 compared to -1.9% in FY15 Trend in PAT ROE (%) (1.9) 4 (58) FY 13 FY 14 FY 15 FY 16E FY 17E PAT (Rs Cr) PATM (%) Growth with minimal CAPEX requirement to boost ROE to.3% in FY17 compared to -5% in FY (5.) FY 13 FY 14 FY 15 FY 16E FY 17E

21 Company Background Balrampur Chini Mills Limited (BCML) was incorporated in Today, BCML is one of India s largest and most respected private sugar mills. It has a cumulative sugar manufacturing capacity of 79, tonnes per day. It has invested in the distillery business with a cumulative capacity of 3 kilolitres per day. It has invested in bagasse-based cogeneration power facilities with a saleable power capacity of MW. BCML is headquartered in Kolkata, West Bengal. The Company s 11 manufacturing units are located in Balrampur, Babhnan, Tulsipur, Haidergarh, Akbarpur, Rauzagaon, Mankapur,Kumbhi, Gularia, Maizapur and Khalilabad in Uttar Pradesh, India. Having started its operations four decades ago, BCML is now one of India s largest integrated sugar mills and most efficient sugar producers in the country is best placed to capitalize on the positive structural changes witnessed by the industry. Improving ethanol dynamics and robust balance sheet will aid profitability. The Company s subsidiary (~54% stake) Indo Gulf Industries Ltd (IGIL) reported a net profit of H lac (including exceptional profit of H lacs) for the year ended 31st March, 15 as against Loss of H12.74 lacs for the year ended 31st March, 14. Capacities Units Sugar (TCD) Distillery (KLPD) Installed Power (MW) Saleable Power Balrampur Babhnan Tulsipur Haidergarh Akbarpur Mankapur Rauzagaon * Kumbhi Gularia Maizapur Khalilabad** Total Revenue Breakup (FY15) CoGen % Distillary 9% Sugar 81% Key Management Personnel : Key Management personnel Mr. Kamal Narayan Sarogi Mr. NAresh Chandra Mr. Vivek Sarogi Mr. Meenakshi Sarogi Designation Chairman Emeritus Chairman Managing Director Non-Executive Director