Shree Renuka Sugars – Results

Shree Renuka Sugars reported lower-than-expected Q4FY08 result with EBITDA margin of 9%, due to lower-than-average market price of sugar. Sugar segment sales grew 41.4% YoY with sugar volumes rising from 317,674 tonnes to 535,644 tonnes and average sugar prices falling from Rs15,940 per tonne to Rs12,962 per tonne.

The company took maximum advantage of the enormous opportunity in exports, due to which trading sales grew by a whopping 455% YoY. The expansion in distillery as well as power capacities coupled with increase in average realization (12.2% in ethanol per liter and 62.5% in power per unit) helped the company post healthy growth in its co-generation and ethanol businesses.

On an annual basis, sales rose 149.1% YoY. However, due to subdued performance in the last quarter, FY08 EBITDA margin fell 240bp YoY to 12.0% but net profit rose 36.9% YoY to Rs927bn. Although average sugar price in Q4FY08 hovered at Rs16,500 per tonne, the company had to sell it at about Rs15,000 per tonne. This resulted in the company registering a 799bp YoY fall in EBITDA margin during the quarter.

At Rs57, the stock trades at 6.8x earnings FY09E earnings expectations. In a related development, HDFC Sec has downgraded Bajaj Hindustan.