After 2,839% mad rally in 3 years, this stock is still projected to spin money
NEW DELHI: KM Sugar Mills is trading at 8.55 times its trailing 12-month earnings despite a staggering 2,839 per cent rise in last three years.
Analysts say the stock can be a money spinner even after this mad rally.
Rajesh Agarwal, Head of Research at AUM Capital, said the stock is trading at very low valuations and with the kind of demand-supply mismatches in domestic and international markets, and production shortage in Maharashtra and Karnataka, sugar prices are likely to remain firm.
But why this stock?
“During the first half of the financial year, the company saw a 275 per cent jump in PAT and the third quarter numbers are very good too. Interest cost has come down considerably. The management has given an indication that they are trying to put up some plant in Ghana, but we have not taken any of that in our projections. Even excluding the Ghana trigger, we feel the stock can touch a target of Rs 40 in next one year or so,” Agarwal said.
Agarwal’s forecast suggests an 18 per cent upside potential on the stock from its current level.
KM Sugar Mills is a midsized integrated Lucknow-based company, with a crushing capacity of around 9,000 tonnes per day (TCD), distillery capacity of 45 kl per day and power generation capacity of 30 MW. The company is looking to diversify its business into manufacturing, bottling and selling of liquor for human consumption. It is also planning to set up a solar plant, it says in its website.
“The company has staged a smart turnaround in FY17, and compared with last year’s top line of Rs 364 crore, and a bottom line of Rs 11 crore, the company has posted very strong financial performance for third quarter,” Avinnash Gorakssakar of Moneylicious told ETNow.
Gorakssakar said: “Our discussion with the management revealed the company should be posting a bottom line of close to Rs 41-42 crore for the ongoing financial year. Largely, this performance has come on the back of rising sugar prices, which have actually started averaging between Rs 36 and Rs 40 a kg. This trend is likely to continue over the next few quarters.”
That said, the FY17 performance has been largely on account of a lower base. The company reported net sales of Rs 352.87 crore for FY16 compared with Rs 550.45 crore reported for FY15, data available with Capitaline showed.
FY16 profit, though, was higher at Rs 11.71 crore compared with that of FY15, but was less than that for the previous year. However, a concrete comparison cannot be made for previous years due to a change in the accounting year.
Meanwhile, the promoters who hold 64.96 per cent stake in the firm had 26.72 per cent of their shareholding pledged as of December 31, 2016.
Analysts say the stock can be a money spinner even after this mad rally.
Rajesh Agarwal, Head of Research at AUM Capital, said the stock is trading at very low valuations and with the kind of demand-supply mismatches in domestic and international markets, and production shortage in Maharashtra and Karnataka, sugar prices are likely to remain firm.
But why this stock?
“During the first half of the financial year, the company saw a 275 per cent jump in PAT and the third quarter numbers are very good too. Interest cost has come down considerably. The management has given an indication that they are trying to put up some plant in Ghana, but we have not taken any of that in our projections. Even excluding the Ghana trigger, we feel the stock can touch a target of Rs 40 in next one year or so,” Agarwal said.
Agarwal’s forecast suggests an 18 per cent upside potential on the stock from its current level.
KM Sugar Mills is a midsized integrated Lucknow-based company, with a crushing capacity of around 9,000 tonnes per day (TCD), distillery capacity of 45 kl per day and power generation capacity of 30 MW. The company is looking to diversify its business into manufacturing, bottling and selling of liquor for human consumption. It is also planning to set up a solar plant, it says in its website.
“The company has staged a smart turnaround in FY17, and compared with last year’s top line of Rs 364 crore, and a bottom line of Rs 11 crore, the company has posted very strong financial performance for third quarter,” Avinnash Gorakssakar of Moneylicious told ETNow.
Gorakssakar said: “Our discussion with the management revealed the company should be posting a bottom line of close to Rs 41-42 crore for the ongoing financial year. Largely, this performance has come on the back of rising sugar prices, which have actually started averaging between Rs 36 and Rs 40 a kg. This trend is likely to continue over the next few quarters.”
That said, the FY17 performance has been largely on account of a lower base. The company reported net sales of Rs 352.87 crore for FY16 compared with Rs 550.45 crore reported for FY15, data available with Capitaline showed.
FY16 profit, though, was higher at Rs 11.71 crore compared with that of FY15, but was less than that for the previous year. However, a concrete comparison cannot be made for previous years due to a change in the accounting year.
Meanwhile, the promoters who hold 64.96 per cent stake in the firm had 26.72 per cent of their shareholding pledged as of December 31, 2016.
