Indian Sucrose - Rs.28.00

Incorporated in 1990, Indian Sucrose Ltd (ISL) was originally promoted jointly by Punjab Aro Industries Corporation and Mukerian Papers Ltd. Later, Mukerian Papers Ltd and its nominee companies including Malwa Cotton Spinning Mills Ltd. and Punjab Woolcombers Ltd. took over the control of the company. ISL belongs to the Oswal Woolen Mills Group and was earlier known as Oswal Sugars Limited. In 1992, it set up a plant in Punjab to manufacture white crystal sugar with an installed capacity of 2500 TCD. The plant also had certain additional facilities like co-generation of power to the extent of 6.6 MW.

Till now, the Indian sugar industry was ailing due to excess supply, lower price realisation, higher input cost, much govt. intervention etc. But over the past few years, things have improved a lot for the industry. Sugar prices are hitting new highs, demand supply mismatch has narrowed down and the sector as a whole is expected to be de-controlled in future. The price of sugar by-products prices is also rising. To take the advantage of this boom, ISL has increased its capacity from 2500 TCD to 3500 TCD and has also acquired Ranger Breweries Ltd., which owns a distillerv unit at Mehatpur H.P and produces 4 well-known brands of Rum namely Champion, Old Flame, Black Jack & Gold Flame. ISL is also planning for a forward integration by setting up a plant for manufacturing Ethyl Alcohol from molasses.

For FY05, its net sales increased by 50% to Rs.68 cr. whereas the NP zoomed to Rs.10.45 cr. compared to Rs.1.20 cr. last year. Its OPM improved substantially 27% compared to 10% in FY04. This works out to an EPS of Rs.7 on its current equity of Rs.15.40 cr. Its book value as on 31st March 2005 stood enhanced to Rs.13 from Rs.6. Assuming sugar prices to remain high in future, ISL can register sales of Rs.80 cr. and NP of Rs.12 cr. leading to an EPS of Rs.8 for FY06, and can be expected to return to the dividend list. These figures exclude the recently acquired Rum business and its consolidated numbers will be much higher. Yet, its current market cap is around Rs.40 cr. Hence investors are recommended to buy at current levels with a price target of Rs.50 (80% appreciation) in 12 months time.