Dharani Sugars & Chemicals Ltd
(BSE Code: 507442) (CMP: Rs.40.60) (FV: Rs.10)
Incorporated in 1987, Chennai-based Dharani Sugar s & Chemicals Ltd (DSCL) manufactures and sells white sugar. It also produces molasses and other by-products. In addition, it is involved in the generation of electricity; and production of industrial alcohol including ethanol. It has three integrated sugar plants with a total crushing capacity of 10,000 TCD, a 37 MW co-generation power plant and a multi-product distillery of 160 KLPD. With an equity capital of Rs.33.2 crore and reserves of Rs.141.18 crore, DSCL’s share book value works out to Rs.52.53. The stock trades at P/BV of around 0.77x. The promoters hold 61.55% of the equity capital, which leaves 38.45% stake with the investing public.
For Q1FY18, DSCL reported a net profit of Rs.1.08 crore against a loss of Rs.9.16 crore on 83% higher sales of Rs.153.43 crore fetching an EPS of Re.0.33. After reporting losses consistently for four years, DSCL reported profits in the last two quarters and we expect this trend to continue in the coming quarters as well. It has reduced debt by almost Rs.50 crore in FY17. Technically, the stock has given a strong upward breakout with volumes. Investors can buy this stock with a strict stop loss of Rs.32.5. On the upper side, it could zoom to Rs.48-51 levels in the short-term and further to Rs.60 in the medium-term.