>DHAMPUR (RELIGARE HICHENS HARRISON)

One-time trading gain to indirectly benefit margins

To book trading gain of Rs 155mn: Recently, Dhampur Sugar sold its last raw sugar import assignment of 60,000 tonnes (import price $500 per tonne) in the open market at US$ 555/tonne. The one-time gain of Rs 155mn from this sale (assuming exchange rate of US$ 47) would be booked in Q1SY10. The company now intends to purchase raw sugar, if global prices correct in the near term.

Cost of remaining imports drops to $400/tonne: Sale of the last import assignment at US$ 500/tonne has lowered the cost of remaining imports (0.21mn tonnes) to US$ 400/tonne. Lower procurement cost is likely to expand EBITDA margins by 180bps to 21.8% in SY10, as against 20% estimated earlier.

Sales volume estimates lowered 6.2%: Contrary to our expectations, Dhampur Sugar was not able to process any raw sugar in September ’09; the same would now be processed in SY10. Incremental volumes are likely to partly offset the drop in overall sugar volumes in SY10. Correspondingly, we lower our sugar sales volume estimates for SY10 by 6.2% to 0.46mn tonnes (vis-à-vis 0.49mn tonnes earlier). This translates into a downward revision of 5.8% in revenue
estimates for SY10.

Net profit estimates revised upwards: Given the improvement in EBITDA margins, we revise our net profit estimates for SY10 upwards by 3.4% to Rs 1.62bn (excluding one-time trading gain of Rs 155mn). However, on including this one-time gain, the revised net profit for SY10 would stand at Rs 1.74bn, as against our earlier estimate of Rs 1.6bn.

To see full report: DHAMPUR SUGAR