DHAMPURSUG - Dhampur Sugar Mills Ltd. Share Price

The management of Dhampur Sugar Mills provided a cautiously optimistic outlook, emphasizing recovery from H1 FY25 losses due to improved operational conditions and strategic initiatives. Key points include:

1. Operational Challenges & Recovery:

   • Q3 FY25 marked a return to profitability after H1 losses caused by feedstock restrictions (lifted in August 2024) and cane shortages due to red rot disease.
   • Crushing began on November 7, 2024 (vs. October 30, 2023), leading to lower cane crushed (11.33L tons vs. prior year) and reduced sugar production (0.97L tons vs. 1.29L tons).

2. Cane Development & Red Rot Mitigation:

   • Implementing a varietal shift plan over 2"“3 years to combat red rot, prioritizing seed availability and cane development. Early results show improved pol% in plant cane.

3. Ethanol Strategy:

   • Shifted feedstock mix to B-heavy molasses (40%) and grain (30%) after syrup prices stagnated.
   • Ethanol sales declined 50% YoY (133.11L liters vs. 268.69L liters) due to prior season's cane shortage and molasses inventory constraints.

4. Sugar & Export Outlook:

   • FY25 sugar production estimated at 26.5"“27M tons nationally. Exports (1M tons allowed; company allocated 10,256 tons) to be executed via quota swaps with coastal mills.

5. Diversification & Growth:

   • Potable spirits sales rose 40% YoY (7.9L cases), aided by new tetra-pack machines.
   • Stable performance in chemicals (ethyl acetate) and power segments.

6. Financials:

   • Q3 revenue rose to Rs.587Cr (+21.7% YoY), driven by sugar (+31.1%) and spirits, offsetting ethanol declines. PAT stood at Rs.15Cr (vs. Rs.31.6Cr YoY).

7. Policy & Debt:

   • Ethanol pricing stability expected; no FY25 expansions planned. Healthy balance sheet with manageable debt (long-term ~5.25%, short-term ~7.8%).

Outlook: Focus on varietal shift to improve cane supply, ethanol diversification, and stable sugar realizations (Rs.41K/ton). Government's E20 push and export flexibility to aid medium-term growth.

Question 1:
"Sir, my first question is, could you share the expected sugar production for this year, and how you see the outlook for the next year?"
Answer:
Gaurav Goel stated that India's sugar production for FY 2024"“25 is expected to be 26.5"“27 million tons. For FY 2025"“26, production is likely to rise due to improved cane yield in Maharashtra and southern India, though it's too early for precise estimates.

Question 2:
"Firstly, could you share insights on how January has been in terms of cane availability and recovery? Have you seen any improvement compared to earlier trends?"
Answer:
January saw improved cane availability with higher pol% (sucrose content) in plant cane, matching prior-year levels. Recovery improved as ratoon cane (lower pol%) was replaced by plant cane.

Question 3:
"And may I request you to share the current transfer prices for molasses, both B-heavy and C-heavy?"
Answer:
Susheel Mehrotra clarified transfer prices: C-heavy molasses at INR 850 per ton and B-heavy molasses at INR 1,200 per ton.

Question 4:
"Sir, with the recent ethanol price revision, what is the targeted production mix across different ethanol routes?"
Answer:
The mix shifted to 40% B-heavy molasses, 30% syrup, and 30% grain-based ethanol post-January 28 due to unchanged syrup prices. Earlier, syrup dominated until late January.

Question 5:
"Sir, have we observed an improvement in sugar realization in January and early February? How do you see the pricing trend evolving?"
Answer:
Sugar realizations rose to INR 41,000/ton (ex-mill) from INR 37,500"“38,000 earlier. Prices are expected to remain stable due to balanced supply and government interventions.

Question 6:
"Sir, could you share our allocated quota and expected timeline for exports?"
Answer:
Dhampur's export quota is 10,256 tons, which will be sold to coastal mills for better logistics. The company will not directly export.

Question 7:
"Broadly, if I look at the mix of ethanol... can we assume that primarily all the production will come from B-heavy and syrup? Or are we still planning to use maize?"
Answer:
Ethanol production will involve B-heavy (40%), syrup (30%), and grain (30%). Maize remains part of the mix due to operational flexibility.

Question 8:
"How does the differential price realization work when selling export quotas to other mills?"
Answer:
Quota pricing depends on global sugar prices, export timing, and holding costs. Current global prices (~$19.6/lb) are stable, favoring white sugar exports.

Question 9:
"Over the medium term, how should we look at cyclicity in the sugar industry?"
Answer:
Cyclicality has reduced due to diversified revenue streams (ethanol, power, spirits). Ethanol flexibility mitigates sugar-specific risks, stabilizing profits.

Question 10:
"Is management considering a buyback given the current stock price?"
Answer:
The balance sheet is healthy, but decisions on buybacks or dividends will be evaluated post-March 2025 results.

Question 11:
"What is the government's ethanol policy outlook, and will prices rise further?"
Answer:
The government aims for E20 blending and balances ethanol pricing with sugar stability. FY 2024"“25 prices are fixed; FY 2025"“26 adjustments depend on cane availability.

Question 12:
"What is the recovery rate for plant cane, and how much can we recover from lost ground?"
Answer:
Plant cane recovery is comparable to last year. Crushing duration will determine final output, with Dhampur and Rajpura units expecting marginally lower recovery (0.7% and 0.3"“0.4%, respectively).

Question 13:
"Are grain distilleries using FCI rice remunerative?"
Answer:
Dhampur uses maize instead of FCI rice due to logistical risks and higher costs associated with FCI tenders.

Question 14:
"What is the debt reduction plan?"
Answer:
Long-term debt costs ~5.25%, short-term ~7.8%. No urgent reduction plans; focus is on optimizing existing debt structure.