Sharekhan re-initiates coverage on this multibagger sugar stock with buy rating; shares up over 55% in just one month

Sugar stocks have been flavour of the season amid ethanol blending push by the government and bullish views by brokerages in the recent past. There are many sugar stocks that have given multibagger returns in the past one year.  

Brokerage house Sharekhan has initiated coverage with buy rating in one of such sugar stocks. 

Re-initiating coverage on Dhampur Sugar Mills Limited (DSML) with a Buy recommendation, the brokerage assigned a target price of Rs 692 per share for this sugar stock due to discounted valuations and strong growth prospects.  

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"We re-initiate coverage on Dhampur Sugar Mills Limited (DSML) with a Buy recommendation, assigning a price target of Rs. 692. Discounted valuations at 10.5x/8.4x its FY2023E/FY2024E EPS and strong growth prospects (focusing on Ethanolisation) make it another strong play in the sugar sector," it said.  

Dhampur Sugar Mills Limited (DSML), one of the largest sugar companies in India with integrated facilities of 45,500 tonne per day (cane crushing capacity), distillery capacity of 500 kilo litres per day (KLPD), and co-generation capacity of 216.5 megawatts (MW), aims to increase investment in ethanol capacity with strong support from the government’s prudent blending policies, strengthening the non-sugar portfolio of the business, and enhancing overall profitability in the medium to long term. 

"The government’s support for increasing ethanol blending to 20% by SS2025 provides further scope to improve growth prospects in the medium to long run. The company strengthened its balance sheet by reducing debt by Rs. 830 crore in the past two years because of improved cash flows (likely to further reduce debt by Rs. 320 crore by FY2024)," underlined Sharekhan.  

Any change in the government’s ethanol blending policy or decline in sugar supply due to weather vagaries or other supply constraints would act as a key risk. 

At 10.45 am, shares of Dhampur Sugar Mills were trading with 2 per cent gain to Rs 542 per share on the BSE. This sugar stock has given multibagger returns to its shareholders as the shares have gained nearly 200% in the past one year and have surged 57% in the past one month alone as on March 24, showed technical data of the stock.  

The shares of jumped by over 650% in the past 2 years and given whooping 1100% return in the past 10 years.  

The scrip traded on 52-week high value on March 13, while it touched year low value of Rs 173.50 on April 5 last year.  

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