Anil Singhvi picks Dhampur Sugar as his SIP stock of the day – check targets here

The surging sugar prices in the international market have brought great relief to sugar companies in India. In this regard, Zee Business Research Analyst Ashish Chaturvedi, in a discussion with Zee Business Managing Editor Anil Singhvi, explains the strong fundamentals of Dhampur Sugar, which is in a bull rally for the last couple of days. 

An 88-year-old time-tested company with strong promoter background, Dhampur Sugar is one of the most lucrative sugar stocks with quite good valuations, Chaturvedi said. He added, the promoter VK Goyal’s industry experience, has benefitted Dhampur Sugar immensely.  

See Zee Business Live TV Streaming Below:

Citing reasons for the price hike in sugar globally, Chaturvedi said, "World’s second-largest sugar manufacturer country, Brazil is facing drought, similarly, the fifth-largest sugar producer, Thailand too is going through a drought-like situation. What is more, global production of sugar has fallen and around 1.5 crore deficit supply is reported in this essential commodity." 

Chaturvedi expects this will directly have an impact on sugar companies in India. And, it will open up huge export opportunities; around 30 per cent of total production could be exported. He also said that sugar companies will improve their realisation, and this overall price increase scenario will have a direct impact on Dhampur Sugar. 

SIP STOCKS'- Strong Investment Portfolio

आर्कशक वैल्युएशंस के साथ बड़ी कमाई के लिए तैयार Dhampur Sugar

अनिल सिंघवी को क्यों पसंद है कंपनी? जानें यहां#SIPStock #StockMarket #Investment @AnilSinghvi_ @AshishZBiz pic.twitter.com/pLXHXHvnDg

— Zee Business (@ZeeBusiness) May 7, 2021

Speaking about the strong fundamentals of Dhampur Sugar, Chaturvedi states, the company, in 2019, made a strategic announcement of increasing distillery capacity by 1 lakh litre per day, due to which there was forward integration. In 2020, it had started making hand sanitizer and country liquor and the demand for hand sanitizer was already surplus and a huge increase in revenue was seen. 

The research analyst says, we are seeing a business turnaround of the company, as along with growth, it is also focusing to improve its balance sheet. In FY21, they have reduced their debt by Rs 600 crore, which helped them to reduce interest cost, and to improve the bottom line of the company. 

Similarly, the Foreign investors have been constantly shown their confidence in the company as they have increased their stake in Dhampur Sugar by 2.85 per cent in March 2021 versus 1.73 per cent in September 2020, says the research analyst. He adds, the company’s valuations are quite supportive despite the bull run in the stock. Market cap/sales at 0.4x; price to book at 1.2x; PE is at 7.7x and ROE (return on equity is at around 14 per cent. 

Mentioning that Dhampur Sugar is getting ready for bumper returns, Singhvi adds, Inventory gain would be the biggest trigger for this stock to surge. It has around Rs 1250 crore of inventory as compared to Rs 1700 crore of market cap. He expects around Rs 200-225 crore gain will be achieved only on an idle and available inventory of the company and at least Rs 35 inventory gain per share is expected. 

He points out the second trigger for this company stock to surge would be its debt reduction from Rs 1200 crore to now Rs 600-700 crore. 

Singhvi says he expects EPS around Rs 60-65 and sales from Rs 4000 crore to 5000 crore in FY22 from the company. 
Singhvi recommends that investors Buy the shares of the company with a target of Rs 300 per share on a short-term basis and with respect to investing perspective, it would surge to Rs 350-400 apiece level. 

In this regard, the market analyst and expert Simi Bhaumik says the stock is likely to reach Rs 290-310 per share levels, however, if it sustains this level we may see it surging to Rs 340 per share. However, the breakout from Rs 310 apiece is a must in order to achieve the second target, she added.