SIP Stock ALERT! Make Strong Investment Portfolio by Magadh Sugar and Energy Limited; know the targets by Market Guru Anil Singhvi

Zee Business Senior Research Analyst Varun Dubey has suggested Magadh Sugar and Energy Limited as today's SIP (Strong Investment Portfolio) stock. Explaining the triggers behind the growth of the company he said that K K Birla Group is the promotor of the company, and it has attractive valuations as well.

Varun said "Around 85 percent of the company's revenue comes from sugar space while around 10 percent from distilleries and the rest 5 percent comes from cogeneration." 

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"The biggest trigger for the company is its distilleries business. The company is planning to expand the capacity of its distilleries business from around 75 KLPD to 155 KLPD by January 2022," he added.
Speaking on the margins he said that the margins of the company in this segment are very high at around 48.4 percent. 

Another trigger for the company's growth is its inventories. Varun said " The inventory of the company is around Rs 660 crore while the market cap is around Rs 225 crore."

He added that there has been a hike of around 20 percent in sugar prices in April because of lower production in  Brazil and Thailand because of draught.

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Speaking on the valuation Varun said that the company trades at only 0.5 prices to book value and its P/E is only 9.4 times while the market cap to sales is around 0.27. Therefore from every parametre, the company is in a good position.

He added that promoters' stake in the company is around 62.5 and is stable for a long time which also provides a comfort zone.

Zee Business Managing Editor and renowned Market Guru Anil Singhvi also said that the company has a strong promoter that is K K Birla and CARE ratings have also recently upgraded the rating and outlook of the company. 

Talking about other triggers the Market Guru said that the sugar cycle is in a positive trend, the balance sheet of the company is strong and the company trades at half the price of its book value.

The Market Guru has given a short-term target of Rs 275 and for positional investors, the target is for Rs 375 to Rs 400.