Dhampur Sugar Mills Limited (500119) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, welcome to the Dhampur Sugar Mills Limited Q3 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Navin Agarwal, Head Institutional Equities at SKP Securities Limited. Thank you, and over to you, sir.

Good afternoon, ladies and gentlemen. It's my pleasure to welcome you on behalf of Dhampur Sugar Mills Limited and SKP Securities to this financial results conference call. We have with us Mr. Gaurav Goel, Managing Director; and his colleagues, Mr. Anant Pande, CEO; Mr. Susheel Mehrotra, CFO; and Mr. Vinit Gupta, VP Finance; and Mr. Akshat Kapoor, VP Operations. We'll have the opening remarks from Mr. Goel, followed by a Q&A session. Thank you, and over to you, Mr. Goel.

Thank you, Navin. Good afternoon, and a very warm welcome to all of you who are present at the Dhampur Sugar Mills Q3 FY '23 Earnings Conference Call. First of all, let me share the operating numbers of the company. The company crushed 12.98 lakhs tonnes of cane in this quarter, which was 11.92 lakhs tonnes in the corresponding quarter last year. There's an increase of about 9%. The gross recovery in this quarter was 11.34% which has been marginally better than the corresponding quarter last year, which was 11.22%. Sugar production during the quarter is 1.02 lakh tonnes compared to 1.22 lakh tonnes in the corresponding quarter last year. Sugar sales during the quarter has been 0.73 lakh tonnes versus 0.98 lakh tonnes in the corresponding quarter last year. Average sugar realization in this quarter has been INR 35.37 per kgs as against INR 35.15 per kg in the corresponding quarter last year. The company diverted 2.41 lakh tonnes of cane for production of ethanol through syrup in this quarter. The ethanol production during the quarter is 239.96 lakh liters, which was 166.6 lakh liters in the corresponding quarter last year. Out of this 239.96 lakhs, 166.30 lakh liters was [ produced ] from syrup and balanced from B-Heavy. Production and sales of ethyl acetate have been 85.33 lakh kgs and 85.34 lakh kgs. This is -- this was comparable with 70 lakh kgs and 67.47 lakh as, respectively, in the corresponding quarter last year. So production was up by about 22% and sales by 26.5%. Production and sales of potable spirits have been 4.4 lakh cases compared to 3.07 lakh cases last year same quarter. And the sales has been 4.43 lakh cases versus 3.07 lakh cases in last year. The company received the consent to operate for its new distillery plant, which will enhance distillery capacity to 350 KLPD on B-Heavy molasses. We are still waiting for certain approvals, which should be coming -- we had expected very shortly, which will enable the commissioning of the plant. I would now request our CFO, Susheel Mehrotra, to take us through the financial performance of the company. Thank you. Over to you, Susheel.

Good afternoon, once again, and a very warm welcome to our earnings call for Q3 FY '23. Coming to the financial performance of the company, our Board of Directors approved the financial results for Q3 FY '23 on 30th January. The income from operations during the quarter ended December '22 stands at INR 643.7 crores and the PBT is INR 66.7 crores, cash profit is INR 68.7 crores as against the same in the corresponding quarter last year. Income from operations was INR 630.6 crores. EBIT INR 78.4 crores and cash profit was INR 77.8 crores. The inventory valuation rate is 33.60 per kg as against 32.30 per kg last year. The closing inventory as of 31st December '22 is 0.71 lakh tonnes as against 1.03 lakh tonnes as of 31st December 2021. Let me now take you through the business line performance. Our revenue from sugar business is INR 421.1 crores as against INR 439.1 crores in the corresponding quarter last year. Revenues from Power business is INR 70 crores as against INR 63 crores, revenue from its ethanol business is INR 158.7 crores versus INR 100 crores in the corresponding quarter last year. Revenue from chemical business is INR 70 crores versus INR 71.8 crores and revenue from portable spirits is INR 109.3 crores versus INR 76.7 crores in the corresponding quarter last year. Our profit from sugar business is INR 15.7 crores versus INR 41.9 crores. From Power business is INR 24.6 crores versus INR 24.9 crores, ethanol is INR 35.9 crores versus INR 27.6 crores. And from chemical business, it is INR 6.4 crores versus INR 2.6 crores. From portable spirit, it was marginally negative INR 0.8 crores versus INR 0.2 crores positive last year. Coming to consolidated results. The revenue from operations during the quarter stood at INR 642.2 crores, EBITDA is INR 86.4 crores, EBIT is INR 67.1 crores and PAT is at INR 36.4 crores. And against the claim in the corresponding quarter last year, revenue from operations was INR 630.4 crores. EBITDA was INR 109 crores. EBIT was INR 78.8 crores and PAT was INR 58.1 crores. The company has made repayment of long-term loans of INR 78.8 crores in Q3 FY '23. Long-term debt as of 31st December 2022 stands at INR 234.1 crore. So these are our financial numbers on a broad level. Thank you once again for joining us on the conference call. We'll be happy to answer any questions that you may have. Thank you.

[Operator Instructions] The first question is from the line of Aman Sonthalia from AK Securities.

And recently 3 developments have taken place. Number one, sir...

I'm sorry to interrupt you. But your voice is breaking. I request to come in a better reception area, please.

Just 2 minutes, sir. Now my sound is clear, sir?

Yes, Yes. Aman. Yes.

Sir, recently, 3 developments, have taken place. Number 1 is that the -- as for the ground report, the production of India may come down below 325. Number two, Brazil has increased ethanol prices. Number 3, the ban on pesticide use or in the sugar beet in European Union. So how it will impact the sugar prices going forward sir?

Thank you so much. As far as the first part goes, India for surely is lower than what we had expected 3 months back, but ISMA just had a meeting just a few hours back and 34 billion tonnes is what we expect India to do as on date. I mean we are still early. I mean, January end, but 34 is the number that ISMA has sort of finalized as of now. Yes, you are right. They had increased their prices. Sugar even EU -- I mean beet, everywhere like globally, we are seeing a lot of changes which are happening, which are positive for India as of now because even next year, we do believe that India will again be in the export market. I mean. how much is the -- had it?

Sir, will it again will be a bull run in the long term, midterm bull run in the sugar sector, sir -- sugar prices?

Are you talking about India alone?

Internationally, sir. Globally.

See again, globally for me to answer it becomes very, very tough in case any 1 of our us really had an answer. But for surely, globally, also, there seems to be that Q2 and Q3, I don't see any shortage as of now, globally. But in Q4, again, shortage is expected as of now for FY '23, '24. So India will again have a great opportunity to export, but what the prices will like be is anyone's guess because Brazil can always change with the ethanol and Sugar. So that is 1 part that we'll have to see their plants will start in about end March, April. So you'll have to see as to how much of -- how much they switch amongst the 2. But yes, globally again for Q4 FY '23, '24. Globally, India won have a great opportunities to again be exporting. Obviously, we'll have to see what our monsoons and what is the crop, which is expected for FY '24, '25 -- '23.

Yes, sir. And sir, is still there is no clarity on the sugarcane price. So when can we expect the sugarcane price for the current season?

Aman, question that has been asked by us all, and I really don't have any date, but I hope it's very, very soon. So it can happen actually any day, but I don't have a specific time that I can say to you that when it will come. But hopefully, in the next week, 2 weeks, we are expecting it to be out.

Okay, sir. And sir, 1 more question that the yield and recovery was not very good. Not -- I'm talking about Dhampur, but overall, the recovery and yield was not very good in the plant cane. So how you force a -- so how you foresee the in-land recovery in the plant cane so?

As of now, our plant cane has just about started to come. And we are seeing from our side, and I'm only talking about myself, is our plant yields are okay, given the all in cane seems to be okay. So from our side for our 2 plants, we all seem to be fine. So we should be equal or we are hoping to be slightly higher than what we were.

We are expecting better crossing compared to last year?

At least the same for sure and higher.

And sir, when you will start this grain base distillery?

So our grain base is expected to start by end of March.

And the current grain prices, whether it is profitable and if it is profitable, then how much it is profitable sir?

Again, grain prices are fluctuating a lot right now. But yes, it present grain price, which is at about for the last...

At grain price -- current grain prices of almost about INR 20 and the DDGS price, which is the by-product of around INR 25 or so, it is still looking marginally profitable at this point in time. But this prices are fluctuating. So we are keeping a watch on that, and we'll take a con based on that.

And sir, for the valuation of sugar, sir, how much price we have taken for B-Heavy and this Bajaj?

So for Bajaj, there is a standard price, where we have taken INR 100 and for B-Heavy, we have valued at INR 1,100.

The next question is from the line of Sanjay Manyal from ICICI Securities.

Just want to understand what is our estimate on the full year crushing number in the sense if you just take the FY '23 number, will it be like 6%, 7% higher than the last year?

I don't think it will be 6% to, we are expecting it to be higher about 2% to 2.5% vis-a-vis.

So this must be for the season, I believe?

Yes. Yes.

And if you see in terms of, say, financial year FY '23 can you -- last year, we did somewhere around 35.8% or 36%, somewhere around 36%. So will it be looking at the current run rate means what could be the number for '23?

See, March for sure will be higher than what it was last year because we have already, as we all said, that we are about 1 lakh higher than what we did last year. So we are 9% higher than what we did last year, as of 31st March, yes, for sure, we will do [indiscernible]. 35.83% you are totally right was than last year. So this year should be close to about 37%.

37%, okay. And we have done substantial means out of this until I mean Q3 number of what I could see, 12.98% is the cane crush and out of this 2.41% from the syrup. So what could be -- so this is roughly more than -- there's more than almost -- it is almost like 20% kind of divergence we are going to [ include ]. So will it be the same number for the full year means 20% kind of number?

It should go up because of the fact that as we just spoke that our expansion that we have done, that should start in the next about 1 week. So we are waiting for the final or [indiscernible] the things from exercise. We have got almost everything done. Today, we are on Tuesday by Friday, we are hoping to get all of the other approvals and then -- so this 20% will become higher by March. So we're expecting it to go at about 24% to 25% average by March.

Okay. Okay. Okay. And considering that fact, our ethanol number for the full year should be somewhere around 8.5 crore liters or more?

No, it's should be more. So 8.5 is what is as of now, 6.86 -- for the -- this is up to March. And this is up to March last year. You're asking for up till March or you're asking for the...

Yes, please. If you just see for the financial year '23 and '24, if you can just guide us what would be the number?

[ 6.86 ] was we had done until March of '22, we are hoping to reach about 8 till about March of -- 8 to -- I mean your 8.5 is right.

Great. And next year, after the expansion, this number should go to 12.5?

It should go to about 12. We have to still wait as to whether they change the excise on levy that we have to give for CL, but otherwise, 11.5, 12.5 is what we will do.

Okay. And then given the fact that what my understanding is that syrup economics is still not as good as B-heavy. Is it prudent to do the higher number of -- higher quantity of syrup.

Yes. See, again, out here, even though, again, there are various thoughts on this. And when you speak to others, we are all slightly [ put up ] on that, what is the sort of margin that you get out of B-Heavy syrup, but from our perspective, we have to also see our own feedstock that now that we have this plant, and we are running it well even if move 1 buck, it makes far more sense. Even though we don't believe that there's too much of a difference of B-Heavy and syrup. We believe that the margins are almost the same. But if I don't choose -- syrup I will have no feedstock. So my plant is shut in about 9 months. In order to make sure that I have a feedstock to run for the full 12 months, I have to use syrup.

Sure, sure. So -- and then you have already mentioned about the recovery you are expecting it marginally better. So last year, we did 12.16% on a gross level, and you are expecting maybe a bit better than last year, maybe similar numbers than last year. And am I correct on that?

Yes, yes.

And just on the debt front, what could be our debt levels by the end of March this year?

I'll tell you on the [indiscernible] side, we -- as we speak are around INR 234 crores end of December and INR 240 crores as of today. And we will be drawing down the debt for our distillery extension. So we would be somewhere around 280 -- INR 270 crores to INR 280 crores.

Okay. Okay. And over and above this, there will be a working capital request?

Yes, working capital, is all seasonal depending on the stock we hold. So that is [ it ].

Next question is from the line of Aashav Patel from Molecule Ventures.

Sir, what would be our current cost of production for the sugar segment?

The current -- we have taken the valuation rate at [ INR 33.60 ] for this quarter.

Okay. So [ INR 33.60 ] is our costing?

Yes, that's right.

Got it. And sir, what would be current ex mill prices on average?

They are about 34.52 [indiscernible].

Okay. Sure. And sir, do you expect the MSP prices to be reconsidered this time around at enhance base?

I don't think so, my friend. I mean you know what, we've been all this. We've been trying for the MSP price to be in an -- for the last almost of 2, 2.5. I mean I don't think it will happen. 31 is what will stay at as of now.

Sure. And the expected tooling inventory for sugar cycle '23 would be after the production costing [indiscernible].

Inventory as of now that we expect as of 30th 9 seeing bottom number that ISMA has done, it should be the same as what it was last year. So around 6 [indiscernible] is what we expect it to be even as of -- if [indiscernible] won't go up or down, it will be the same.

[Operator Instructions] Next question is from the line of Shailesh Kanani from Centrum Broking.

Sir, I had one question with respect to production, which you had said in your opening remarks, is that ISMA has reduced the production estimates from more than 36 million tonnes to 34-odd million tonnes. So in light of that information, how do you see domestic prices shaping up because we have seen increase in SAP prices 1.5 year [ back ], but the domestic prices have not increased in tandem with that SAP prices. So can you share your views on the same?

I for surely believe that the prices will be range-bound right now. We are about 34.5. By April, May, you may see the price going up by about 1 dot. 35.5 is what I see the price change to be. So 34 to 36 is the price change that I see post March.

And this is white [indiscernible] sugar you're saying, right, or refined one?

No, this is normal sugar.

Normal sugar. Okay. And also given the production estimates are lower, what do you think about export quota enhancement from 6 million tonnes to 7 million tonnes? Is that the possibility now?

I don't think it is. I don't think it is. I think vis-à-vis [ 34, 36 ] is done. I don't think that we can expect the government to make it higher because I think India will need that much of our own stock to be [indiscernible], so I don't believe that we'll get any further export than what we have already got as of now.

Fair enough. Sir, again, asking more -- talking about the SAP. There are rumors on the -- talks that SAP might increase. So is it a normal thing -- because we are already 2, 2.5 months into the season, so do you think -- can you assign any probability of SAP prices remaining same? Or what should we -- because it is already 2.5 months into the season, can the SAP prices increase now?

And again, sir, this has been asked not only by you but [indiscernible] people. I have no answer before, but like I do believe that they should stay the same because there is no reason for SAP price to be higher. The SAP -- the [ game ] price that we are doing as of now is very, very good. Farmers are happy. Government is happy. So I do believe and I do hope that they stay the same. But again, I don't have a shorter answer on this.

So how long this can be a lingering news that can be going on [indiscernible]? Is there a time line or something like that? Because that keeps on [ falling ] in the market, right? SAP price would increase. Sorry to bother you on this, but...

[indiscernible] we are all expecting and hoping that it is done fast. But again, I don't have any answer on this as to when it will be done. But I do -- and the information that we have that government is seeing it seriously, and it should be done very, very soon.

Okay. Okay. Fair enough. Sir, on the grain-based ethanol, sir, can you shed some light on [indiscernible] if we are using that as a feedstock. I guess we would be using bagasse in the feedstock for our plant, right?

No. We will be doing rice and wheat only for our grain-based plant. So for us, when we put up the grain-based plant, that, for us, is an option that how much of sugar I'd sacrifice. So for us, the grain-based plant is just optional. And to -- as to for how much time that we will run the plant, whether we will or we won't, will be all on what is the price of grain that we get. So that's why we are in a very sweet spot on that, that we can always save more of that and still be able to run our plant for full 12 months. So grain for us is just an option that we have. But we will be doing it out of wheat or out of rice and maize.

Okay, sir. Sir, last question from my side. Sir, your views on recovery and yields not only for your company but for the industry and for the UP state per se. If you can give a breakup or your views on Eastern, Western, Central UP, how things are shaping up? And what can be expected for us even. That will be the last question from my side.

See, for us, as I said even earlier, that was said earlier that we've been thankful to God that ours is okay. I mean we are better than what we did last time also. We have been hearing stories that in UP, in certain areas, there are both [indiscernible] cane and yield are lower. But in our 2 plants, they all seem to be okay.

[Operator Instructions] Next question is from the line of Nitin Awasthi from InCred Equities.

Sir, you mentioned the [ estimated ] price for sugar at [ 24.42 ]. Was the white sugar or sugar?

White. So as of now, I was just talking about as a present price, which is there. As of now, it's about 34.5 is the present price of this [indiscernible].

And raw would be lower?

Raw would be lower. So we aren't doing any roles right now. So we've already sold whatever all that we had to do. We are not doing any follow-ups.

Okay, sir. Noted. Understood. So you have been muzzled a lot about this question of the SAP not being announced. Unfortunately, I'll have to ask you one more question, not the same repeated question but a different one but in the same line. If the announcement of SAP comes through and there is a price increase stated by the state government, will it be applicable retrospectively from the beginning of the season? Or will it be from whenever the announcement happens?

See, if we see history, if SAP is said to be higher, it will be from the start of the crop. That is what we've seen as per the past.

Okay. Noted, sir. And sir, is the molasses policy out for this sugar season?

Yes, yes. So that is out. So the excise for -- the fee is like out, and it is [indiscernible] levy is what we have to give.

This year?

Yes. '23, '24.

And last year, how much was it?

20 only.

So there has been no increase in the amount of molasses you have to get to the same profit?

No. Same. So earlier was 18, but then in the middle and in August, they made it to 20. So they've kept it the same.

Okay. Okay. Understood. So earlier policy was 18, but midyear revision was 20, and now they're sticking to the midyear revision?

Yes. So the 20 was done from earlier also. So it was not 20 only from August. It was whatever that we had made. So the same base cap even for '23 to '24.

Okay. Understood, sir. Sir, given that molasses or any derivative whichever probably sacrificed for the state government and becoming such a precious commodity for the company and so valuable as of now compared to where it was 3, 4 years ago. Is there any formula that there is work after this? Or is it just based on size revenue [indiscernible] government?

Great. I mean, again, I think that is -- we have already answered what you asked me.

[Operator Instructions] The next question is from the line of [ Udit Gupta ], individual investor.

So my question is, sir, what is the processing cost of ethanol per liter from molasses or juice? And is it any different from grains, sir?

See, the total cost of production from molasses is 43. And this improves from B-Heavy and from syrup also comes to around 50. I mean there's a gap of about INR 6 to INR 7 within the 2, within B-Heavy and the syrup.

And from grain, as of now the -- see, because we have not started our grain plant as of now. So grain COP will vary a lot vis-à-vis what is the price of grain that point of time. So perhaps in -- after the Q4, once we start grain, I'll be able to offer you better or accurate numbers in May.

Sir, from FCI rice, what I understand, it's like fixed at INR 20 per kg.

So FCI rice, yes, they have not fixed it, but they do end up. But the availability is limited as to how much we can get from them. So again, so FCI prices also vary a lot. And the FCI price also varies from state to state.

It is from state to state. And also at the current FCI price rates, which were around INR 20 plus kind of a thing, it is still looking better to buy from the open market as of now. And those are tendered prices. So we don't know what kind of availability is still there in [ '23 ].

Sir, could you tell me the equation, sir, like if we have 1 kg of FCI rice, like 1x, so how much of ethanol can be produced from it?

For producing, the [ nonvariables ], per [ 100,000 ], we require -- so 2.3 is the norm, so -- and for producing 1 liter of alcohol, we require 2.3 liters of grain.

[Operator Instructions] The next question is from the line of [ Sahil Singh ], an individual investor.

I would like to ask about the transferring price of the B-Heavy-derived ethanol and [indiscernible].

Sorry [indiscernible], but your voice is not coming clear.

I would like to ask about the transfer pricing of the B-Heavy-derived ethanol and the syrup-derived ethanol and [indiscernible].

Okay. The transfer price for B-Heavy is 1,100. And for syrup, which is 1,375 that we have taken. And the cost of production for B heavy-based ethanol is INR 43 and syrup INR 50.

[Operator Instructions] As there are no further questions, I will now hand the conference over to the management for closing comments.

On behalf of Dhampur Sugar Mills, we would like to once again thank you all for taking your time out for this conference call. If you have any further questions, please feel free to contact us either by phone or by e-mail. You can also visit our website, www.dhampursugar.com and post any queries that you have. We will, for sure, get back to you as soon as possible. Thank you all. Thank you very much.

Thank you all.

Thank you very much. On behalf of SKP Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.