As the ethanol prices are scheduled to get hiked by five percent from December 1, sugar stocks are once again back into contention. Including them in the investment portfolio now can definitely sweeten up your returns. The Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi on November 1 raised the basic ethanol price to get distilleries to increase their supply of the product to oil marketing companies (OMCs) for blending with petrol. It should result in rising profitability of sugar firms, as ethanol is extracted from molasses, a by-product of sugar manufacturing process.
The committee has approved a price of Rs 40.85 a litre for procurement season 2017-18 (beginning December 2017), up from Rs 38.97 a litre the previous season. The applicable goods and services tax (GST) of 18 percent and transport charges would be borne by the OMCs. Ethanol contributes 10-15 percent of sugar mills’ annual turnover.
We take a look at the sugar stocks that could give you good returns:
Balrampur Chinni Mills
HDFC Securities is upbeat on company’s prospects as it believes that government’s thrust on ethanol blending program will benefit the company as its sales volumes of Ethanol in H1FY18 were marginally up at 39211 kl. The research firm expects the company to benefit immensely due to improving ethanol dynamics. Balrampur Chinni shares closed at Rs 163.65 on the BSE Sensex today. HDFC Securities has a target price of Rs 198 on the shares implying an upside of more than 21 percent from the current market price.
Here are the other major sugar stocks which are also likely to gain:
Shree Renuka Sugars
The stock of this company closed at Rs 17.97 on BSE Sensex today. The share is up by around 32 percent since January.
The stock of this company closed at Rs 15.25 on BSE Sensex today. The share is up by around 10 percent since January.
Simbhaoli Sugars Ltd
The stock of this company closed at Rs 26.50 on BSE Sensex today. The share is down by around 7 percent since January. However, it may see an
upside from December onwards.