Bajaj Hindustan Stock Analysis Report

Stock market investment research team of Religare Hichens stock brokers has advised to buy stocks of Bajaj Hindustan on the back of rising sugar prices.

Reco. price: Rs 207
Current market price: Rs 212.20
Target price: Rs 234
Upside: 10.3%
Brokerage: Religare Hichens, Harrison

For year ending September 2009, Bajaj Hindusthan’s sugar volumes dropped 27 per cent year-on-year to 6.7 MT, primarily due to lower cane crushing and a depleted sugar inventory. Nevertheless, a steep increase in sugar realizations aided a 1.7 per cent year-on-year growth in sugar revenues to Rs 1,870 crore for the full year.

The company crushed 5.4 MT of cane during the year, as against 10 MT last year. On account of such paucity of raw material (molasses and bagasse), both alcohol and co-gen (power) segments recorded a sharp drop in revenues and operating profits for the year.

Bajaj Hindusthan recorded an EBITDA margin of 22.5 per cent in September 2009 quarter as against 7.3 per cent in the quarter of last year. It recorded a currency swap gain of around Rs 70 crore, leading to a more than five-fold rise in its other income during the quarter. This, along with lower interest outgo, enabled the company to make a net profit of Rs 69 crore in September 2009 quarter as against a net loss of Rs 87.5 crore in year ago quarter.

Despite concerns on relatively higher cane procurement cost of around Rs 205-210 per quintal, buoyant sugar realisations of Rs 33-33.5 per kg have surprised the brokerage positively. Maintain Buy stocks rating.