Sugar stocks spiked higher on Thursday and some of them hit their 52-week highs in an otherwise subdued market on expectations that sugar stocks might remain elevated. Most of them were trading in the green on Friday as well.
Some of the top gainers on Thursday include Uttam Sugar Mills (up 16.45 percent), Ugar Sugar Works (up 8.96 percent), Mawana Sugars (up 8.27 percent), Avadh Sugar & Energy (up 7.38 percent), Bajaj Hindusthan Sugar (6.77 percent), Dalmia Bharat Sugar & Industries (up 6.68 percent), K M Sugars Mills (up 6.18 percent), Sakthi Sugars (up 4.46 percent), Magadh Sugar & Energy (4.46 percent), Balrampur Chini Mills (up 4.05 percent), and Triveni Engineering & Industries (3.60 percent) were all trading in the green zone.
Sugar stocks turned sweet on the expectation that sugar prices will remain elevated due to the deteriorating weather outlook coupled with rising demand. According to ICRA, domestic sugar prices are expected to remain elevated due to lower-than-expected output in India, Thailand and Europe along with delayed harvest in Brazil in April 2023. Moreover, El Nino risk on Asian production may also result in a price increase.
Meanwhile, the domestic sugar industry is cautiously optimistic. The country is headed to produce 32.8 million tonnes of sugar during sugar season 2022-23, against a sugar production of 36.5 million tonnes in the previous sugar season, as consumption is gradually rising and is estimated at about 27.5 million tonnes in SS 2022-23.
In another development, the government approved the export of 6 million tonnes of sugar by May 31, 2023. Therefore, the closing stock at the end of the sugar season 2022-23 is estimated at 6 million tonnes, less than three months of consumption. Tailwinds are expected from attractive international prices, which could catalyse a positive in sugar realisations, as per Dwarikesh Sugar’s latest annual report.
Moreover, India intends to increase the blending of ethanol with automotive fuel from around 10 per cent presently to 20 percent by 2025. This implies that whatever ethanol manufacturers expect to produce will be sold at attractive realisations, eventually resulting in a larger ethanol contribution to the bottom line of companies.
Moreover, analysts expect that ethanol prices would be hiked shortly, which will benefit ethanol producers with high capacities and integrated facilities.
Written By Simran Bafna
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