Sharekhan's research report on Dhampur Bio Organics
Despite seasonally weak quarter DBOL posted strong performance in Q2FY2023 with revenues growing by 51% y-o-y to Rs. 542 crore and PAT standing at Rs. 7.7 crore (EBIDTA margins expanding by 60 bps to 4.1%). This is mainly on account of increase contribution from biofuel & spirit (ethanol) division. With expanded capacity of 312.5 lakh per annum, the company is targeting bio fuel/spirit production of close to 11.5 crore litres in FY2023. Ethanol sales are expected to be close to 10 crore litres. Ethanol sales contribution has increased to 21% in Q2 aiding profitability to remain high. DBOL’s sugar production is expected to increase by 7-8% in sugar season (SS) 2022-23 in line with expected production in the UP.
Outlook
We recommend a Buy on Dhampur Bio Organics Ltd (DBOL), demerged entity of Dhampur Sugar Mills Ltd (DSML), with a price target of Rs. 215. The stock trades at 13.6x/10.5x its FY2023/24E EPS.
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