DHAMPURSUG - Dhampur Sugar Mills Ltd. Share Price

Management of Dhampur Sugar Mills provided an optimistic outlook for the upcoming financial year during the Q4 FY '25 earnings conference call. Key insights include expectations for improved cane crushing in FY '26, projected to exceed FY '25 levels, driven by increased planting and favorable weather conditions. They noted that early indications of higher yields are promising, but final assessments will depend on rainfall patterns later in the season.

For FY '26, management aims for higher ethanol production due to increased feedstock, especially maize, which will enhance overall output compared to FY '25. However, they cautioned that ethanol pricing and margins will be contingent upon government tender outcomes, with expectations for potential increases in prices not forthcoming until October.

Financial performance highlights include a revenue increase with total revenue from operations at INR 2,655.4 crores for FY '25, up 0.41% from INR 2,644.10 crores, albeit with a significant decline in profit after tax to INR 52.2 crores, down from INR 132.91 crores. Despite challenges in the previous year, management expressed confidence in reaching a profit range closer to INR 150 crores in FY '26 but recognized it would require favorable market conditions and continued improvements in operations.

In terms of operational metrics, the company crushed 28.49 lakh tons of sugarcane in FY '25, a decrease of 22% from the previous year, and sugar production plummeted by over 25%. Nonetheless, they reported a marginal rise in sugar sales volume and sugar realization rates, which reached INR 38,736 per ton, an improvement of 4%. With a cane development program in place to mitigate losses from factors like red rot, management is hopeful for a return to healthier production levels by FY '27.

Question 1: "If you can just give us some reasons why the EBIT has been quite lower in the ethanol business, and going forward, what could be the target of ethanol production for FY '26? What could be the realization of ethanol for FY '26?"

Answer: The lower EBIT for ethanol was mainly due to changes in transfer pricing as a result of lower pol in cane. For FY '26, while specific production targets are not available until October, we expect production to be higher than last year due to increased feedstock. However, the realization of ethanol prices remains uncertain until government announcements are made.

Question 2: "Given the recent government approval for ethanol production, any targets for what kind of output we'll generate in FY '26 from ethanol?"

Answer: Yes, we project that FY '26 will see higher ethanol production than last year because we'll have better access to feedstock, particularly from maize, which began operations last year. Although I cannot provide an exact number now, we anticipate an increase overall.

Question 3: "Any targets for cane crushing in FY '26 after seeing some recovery in Q4?"

Answer: We expect a higher cane crush in FY '26 compared to FY '25, as planting has been better this year. The actual impact will depend on rainfall and growth conditions. By Q3, I will have a clearer forecast for cane crushing.

Question 4: "What is the expected seed contribution of CO238 for the sugar season '25-'26, and how will it impact recovery trends?"

Answer: For FY '26, CO238 will comprise about 48% at Rajpura and 65% at Dhampur. Although alternatives aren't as strong, and we aim to shift focus on cane development. On the recovery trends, we expect better pol due to newer varieties in the coming years.

Question 5: "What is the management's expectation on cane availability and overall recovery percentage over the next two seasons?"

Answer: Cane availability should improve due to increased planting, but yields will only be confirmed several months from now. We're hopeful that pol in cane for FY '26 will be similar or better than this year, but it's too early to provide firm projections.

Question 6: "Are there any visibility or early indications on possible revision in ethanol pricing post the recent SAP hike?"

Answer: There's no visibility on ethanol pricing revision until October 2025. Similarly, any changes in SAP will also be determined then, so we must wait for updates before predicting changes.

Question 7: "Any capex plans for the upcoming two seasons, FY '26 or FY '27?"

Answer: For FY '25-'26, we do not have major capex plans. Our focus is on optimizing our current operations and enhancing cane production rather than expanding capabilities for now.

Question 8: "What is the current ex-factory sugar price and do you expect it to increase before the season ends?"

Answer: The current ex-factory sugar price is approximately INR40.5 per kg. I expect it to remain range-bound between INR40.5 and INR41.5 over the next six months.

Question 9: "Has the company incurred additional costs to incentivize farmers to switch to new cane varieties?"

Answer: Yes, we have a cane development budget that helps incentivize farmers, ensuring they adapt to new practices and varieties. This budget has seen a slight increase over the last two years as we enhance our initiatives.

Question 10: "Will there be a material improvement in numbers for FY '26 compared to FY '25, or will it be gradual?"

Answer: Predicting exact improvements for FY '26 is challenging due to various market factors, many of which are beyond our control. While we are working hard to improve, specific outcomes remain highly uncertain.