Sugar

Sector Overview Sharply surplus mathematical product Indias sugar production in India is judge to cross 27mt in SY07 pickings s discharge inventories (end Sept-07) to over 50% of preceding demand. Subdued prices In this context, domestic prices atomic number 18 expected to cover subdued we see infinitesimal hope for a important change beyond authentic directs of Rs13.5/kg (UP). Closed exporting opportunity Export market profitability ashes muted because of execrable international prices and the strong rupee the export premium is unbelievable to do meaningfully. Government interpolation will not help meaningfully Buffer sugar strainings low the government may be increased to 5mtpa from 2mtpa. This increases profitability by < Re0.5/kg on general sales base fountainhead below the Rs2/kg loss at ebit take aims currently macrocosm suffered by these players. surplus policy hit for UP players removal of the 2004 UP subsidy scheme is an additional uncertainty for players in UP taking away Rs0.5-0.8/kg in get on the boilers suit sales base. BJH is most impacted (Rs0.7-0.8/kg) among the top three (BRCM, TRE at Rs0.5-0.6/kg). A new scheme is expected to be announced in the next few weeks just now cyberspace propped up on subsidy dole-outs may not enthuse markets much.

Co-product income will go through a base level of cash flows but we see take a chances of further downgrades in BJH and BRCM to overall losses in FY07. Sugar cycle black tenderness is cool it 4-6 quarters away A recovery in profits and stock performance will have to deferment for a reversal of the sugar cycle . The nature of the cane run (ratoon) might! ensure that SY08 production remains high as well ensuring that much(prenominal) a trigger is a year away. Further, sugarcane remains the most lucrative work for a grangers perspective is payments are timely. If cane price arrears are reduce due to mill subsidies, buffer stocks etc, the cane crop arena in SY08 may not be meaningfully note despite the recent duress (payment arrears) that farmers have faced. This increases the risk of an...If you take to get a full essay, order it on our website: BestEssayCheap.com

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