Just to recap Sakthi sugar has been battered in the recent falls. However, I think it is still a fundamentally sound idea which the market will probably recognise around March 10. when the current crushing season ends. The shortage is for real and no matter what the government does the price of sugar is not going to fall in a hurry. Add to this the fact that for next season India will be going in with absolutely no buffer stock as well as a demand of around 25 million tonnes (assuming a 10 percent increase in usage over demand of 23 million tonnes in 2009-10).
Some of the research reports are also talking about the shortage being more than envisaged and hence raw sugar imports would gain momentum in the period after the current crushing season is over.
Some other pointers are what the corporates are doing. Shree Renuka is still lokking to buy our companies in Brazil. It is also looking to still buy Balrampur Chini. Simbhaoli is setting up a refinery which would get completed in 2011. Isnt it strange that corporates are looking to enhance capacity when we all think that the sugar story is over for now.
The fact is sugar story is far from over. Sugar cycles in the past had significantly impaired the balance sheets of corporates. However, what this year has done is repair them. So from next year onwards the sugar companies will operated with far less debt. Add to this the fact that the sugar consumption is not going to go down. The cola companies, the biscuit companies all want to increase sales and so the sugar consumption is only likely to go up.
Markets as usual take a short term view so we must bide our time. Sakthi sugar is a great turnaround story. Remain invested.
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