Report on Sugar industry

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Indian Sugar Companies
WealthRays Research Desk
Indian Sugar Companies
1) Why sugar stocks gave robust return to investors in the past one year? The sugar companies saw a fall in their prices over the years to a very low level due to excessive loss faced by them and the sugar prices were in check as the production worldwide was at surplus level. But recent increase in the export subsidy and increase in the sugar prices led to increase in the revenue of the company and reduce their losses which gave a boost to these companies and share prices were seen surging. Also shares were seen up on expectation of rise in import duty. 2) What are the recent developments in the sector and how they can impact the performance of sugar stocks from here onwards? Recently the Raw sugar export subsidy of 3.30/kg has been announced which would encourage companies to export more and help in clearing their arrears to the farmers. The losses on raw sugar export will be lower as compared to sale of white sugar. Too much export could bring down the prices globally in turn affecting the domestic prices causing losses to the domestic companies. Also increase in the import duty from 15% to 25%, which will make unfavorable for the domestic importers though there is fall in the international prices. And with clear policies on imports, it would drive the market sentiments and buying could be seen from traders. 3) What are the issues in the sector? The key issue in this sector is control of the prices of sugar by the government. The sugar mills are not able to pay their arrears to the farmers for the sugar canes. The cost of production of these companies is more than what they are able to realize through sales. Due to which the companies are not interested in producing raw sugar as they would not be able to pay cane prices to farmers. Though government is providing export subsidy which would reduce the surplus and increasing the import duty which would remove the uncertainty about imports, however, these measures are not helping in supporting the domestic prices. 4) What are the factors one should look into before investing in sugar stocks? Government regulatory policies is the most important factor to be looked in before any investment to be made, any key changes by them could have adverse affect on the stocks of sugar mills. Price movement of the sugar also affects on the price movement of these stocks. If the prices are increasing, then these companies would get better revenue, decreasing their losses. Demand and Supply of the sugars globally and domestically is one of the factors one should always look into, the production estimates for the coming seasons also gives an outlook of the industry. Investors who look for a short term investment, they should also have keen eye on the harvesting season of the sugarcanes, as the production of it would impact on the output of the sugar.

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Indian Sugar Companies
WealthRays Research Desk
Indian Sugar Companies
5) Can you suggest three sugar stocks which can give lucrative return to investors in the next 24 months? Explain your picks in around 50 words each along with their target price. Shree Renuka Sugars: The stock has tested 120 levels in 2010 and since then downfall was seen, but in past 6 months the stock tested levels of 30 to come back at 19. As the sugar prices increase and better policy from government is taken, share prices of this company is seen bullish. Long position can be taken for a target of Rs. 30-32. Sakthi Sugars: As the company’s losses was seen recovering in April-June quarter this year, the stock prices saw a good move on the upside on accounts of deficit production of sugar, a marginal increase in prices would help the companies recover their losses. Buy target for the stock would be Rs. 35-40.
Andhra Sugars: Though almost all the sugar companies are seen running at losses, Andhra sugars have yet shown profits in the current year and are able to maintain their share prices. This stock in long run could give better returns than others with strong fundamental support. The Stock could be seen touching levels of 210-220.
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