Sugar stocks are in the limelight, getting sweeter by the day. Today, almost all the stocks in the sector are up in the green – Dhampur Sugar, Avadh Sugar, Balrampur Chini, Triveni Eng, Dwarikesh Sugar, Mewana Sugar, Uttam Sugar, Bajaj Hindusthan and Dalmia Sugar.
The prospects for the sector have turned very bright post the excessive rains, with production shortage to facilitate a higher selling price for the sugar companies, which in turn means better margins.
It is estimated that sugar production will drop by 20% (YoY) to 26 mtpa in sugar season 2019-20. Yield in UP is expected to be flat, with yield also to be impacted. Reduction in sugar inventory is expected to push up the realisations and the much needed cash flows.
Introduction of MSP and increased ethanol blending is also expected to sweeten the year for sugar companies.