Key sentence:
- The brokerage maintains its positive outlook on the sugar sector, believing that an increase in sugar prices at a reasonable level will boost profitability.
Worldwide sugar costs have crossed US pennies 20/lb while at the same time homegrown costs have likewise climbed to ₹36/kg (UP).
As the brokerage stated:
“Our view on sugar costs has been emerging. However, we keep up with our position that the sugar business would have the option to send out 6-7 million tons (MT) of sugar in the 2021-22 sugar season without trade endowment, given worldwide sugar costs are higher than the cost of creation for Indian sugar organizations,” the financier said.
These sugar stocks have a Buy rating from ICICIDirect:
ICICIDirect has a Buy on these sugar stocks, with up to half potential gain seen: Balrampur Chini (target cost of ₹515 per share), Dalmia Bharat Sugar (target cost ₹650), Triveni Engineering ( ₹270 target value), Dwarikesh sugar (target cost ₹110), Dhampur Sugar (target cost ₹500), Avadh Sugar (target cost ₹685).
As further, the brokerage stated:
The business said that the public authority had upheld the sugar business through transitory measures (cushion appropriation, MSP, trade sponsorship) over the most recent three years. “With an improvement in essentials because of the ethanol mixing program and a decrease in sugar inventories, the public authority removed the cradle appropriation in August 2020.
Besides, with worldwide sugar costs crawling up to the above cost of creation, it may not proceed with the fare endowment in the 2021-22 sugar season as sugar mill operators can trade without government support.
Further, we accept homegrown costs would stay firm above ₹34/kg, which makes least selling value (MSP) insignificant in the present setting,” it added.
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