Dhampur Sugar - Rs.44.50

The Dhampur Sugar Mills set up in 1933 is one of the largest sugar manufacturing group in India having 5 sugar mills in India and one in Nepal with total installed capacity of 32,000 tonnes of cane crushed per day (TCD). Its units are located in Dhampur (Capacity 12,000 TCD), Rauzagaon (5000 TCD), Asmoli (5000 TCD), Kashipur (5000 TCD), and Mansurpur (5000 TCD). Its Chemical Division has a modern continuous fermentation and distillation plant using molasses as the feedstock to produce Alcohol (6,000 Metric TPA,) Acetic Anhydride (13,000 Metric TPA), and Oxalic Acid (15 TPD). For further value addition, a 30 TPD Ethyl Acetate plant has been added to the range of downstream chemicals. It has recently established a 300 TPA Nicotinamide and INH plant in Lucknow. These products are drug intermediates offering high value addition. More importantly, all the 5 plants of Dhampur have Cosgeneration by bagasse based power plants with a combined capacity in excess of 83 MW, out of which approx 41 MW is being evacuated to the UP Grid. In addition, pilot plants have been established to supply Ethanol to Indian Oil. The company has also completed a turnkey expansion cum modernisation of the milling tandem and boiling house of a sugar mill in the Caribbean and recently it has tied up with a sugar company in Jamaica to provide technical consultancy services to improve the working of five sugar factories owned by the Government of Jamaica.

Domestic Sugar prices have been rising since the beginning of 2004 due to decline in sugar production because of drought and other leading to sharp reduction in inventory levels. Prices are expected rise further in the coming Diwali/festive season and are expected to remain high going forward. Due to the scanty rainfall, the future performance of some south based sugar companies can be affected but Dhampur, based in UP, wont be affected much as the main area for growing cane in Eastern UP are river fed, the Amroha- Bijnor belt is irrigated by the Upper Ganges Canal and the Roorkee Canal runs right upto Moradabad. Some days back to overcome the supply shortage, the government gave freedom to sugar companies to import raw sugar and sell in domestic market but with an obligation to the export same quantity of finished sugar in the next 2 years, which is again positive to some extent.

Due to firm sugar prices, the company has performed exceedingly well in the last 2 Quarters. For June 2004, though sales was marginally down to Rs.116.50 cr. the NP jumped 5 times to Rs.10.50 cr. from Rs.2.10 cr. For full year ending September 2004 the company is expected to make sales of Rs.500 cr. and NP of Rs.35 cr. leading to an EPS of Rs.10 and going forward for FY05 company can earn NP of Rs.50 cr. registering an EPS of Rs.15 So at current market price (CMP) this scrip is trading at 6 PE multiple for FY04 earning and 4 PE multiple for FY05 estimated earning. Investors can expect 50 per cent appreciation in the next 6~8 months.