Key Result Highlights:
- Sugar performance improves in standalone operations: Owing to strong growth in both domestic sugar sales volume (28% y-o-y) as well as export volume (23% y-o-y), sugar segment posted robust revenue growth of 39%. Moreover, average export realisation, which was strong at Rs35/kg vis-à-vis average domestic realisation of Rs27/kg during Q1FY13, helped SHRS post PBIT margin of 11.2% (up 580bps y-o-y). However, due to early completion of crushing in the current sugar season, by-product volumes were lower y-o-y. Nevertheless, this was offset by the sugar segment and the company posted strong EBITDA growth of 31% y-o-y. But, steep jump in interest expense to Rs114mn (owing to higher debt, higher interest rate) in Q1FY13 vis-à-vis Rs51mn y-o-y resulted in core PAT declining 58% y-o-y.
- Steep hike of 20% in sugar price in past one month: While average sugar realisation for SHRS was at Rs27/kg in Q1FY13, it has shot up about 20% over the past one month to Rs33/kg currently due to concerns over monsoon and an incremental demand coming ahead of the festive season. This is likely to augur well for the company’s standalone operations’ profitability.
Outlook and valuations: While SHRS’ operational performance is likely to improve in standalone operations over the next two quarters owing to higher realisation and in Brazilian operations due to better cane availability expectation, debt concerns persist. Hold
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