Associate of DOHA BANK

DBFSL EQUITIES

Wednesday, 17th Nov 2015.

Sharp rally in sugar stocks:

Seasonal Report Prepared by:

Reasons for the sharp rally in sugar stocks:

India is the world's second biggest producer of sugar. The rise in sugar stocks is due to a sharp spike in prices globally. Middle Eastern buyers are lapping up Indian sugar which is likely to offload some of the inventory as well. But overall most of these stocks have bottomed out and with the cycle really turning up possibly in next seven-eight months. Our view is that this is the right time to invest in sugar stocks from long term perspective.

Sugar stocks continue rally on shortage forecast: Indian Sugar Mills Association has projected the country's sugar production to drop 5 per cent this year because of insufficient monsoon rain. This should support domestic prices, which have been under pressure because of surplus production over the past five years.

Here are the reasons for the sharp rally in sugar stocks: 1) A rally in global sugar prices will help domestic sugar mills looking to export 40 lakh tones of sugar this year, traders say. To boost exports and cut down domestic stockpiles, the government had earlier announced a subsidy of Rs 4,000 a tone for exports of raw sugar in 2014-15 year ended on September 30. India is the world's second biggest producer of sugar.

2) The government is working on a solution to ensure that cash-starved mills make timely payments of over Rs 12,200 crore dues to farmers. This will help the balance sheets of sugar companies that owe large sums to cane growers.

Technical view:

Shree Renuka Sugars: Now the stock is trading at the rate of 15.30 levels (17.11.2015, 10.20 am).one year high of the stock is 20.45 and one year low is 7.05. The stock after topping out around Rs 120 levels has been in a major downtrend forming a series of lower highs and lows. After completion of Wave 'V' the price usually retraces close to Wave 'IV' which is at Rs 38- `40 levels. The overall scenario indicates a potential bottom in place which is also confirmed by volumes and momentum indicators. We expect a rise from the current levels with a target of 17.20, SL 12.80.

Balrampur Chini Mills: Technical view:

Now the stock is trading at the rate of 73.25 levels (17.11.2015, 11.10 am).one year high of the stock is 74.30, marked one year high today. One year low is Rs. 37. The stock after a long term decline took support at the rising trend line drawn from the November 2008 lows. The prices formed a strong bullish engulfing candle. The prices on the daily charts are trading above its long term uptrend. We expect a rise from the current levels with a target of Rs 82.20, SL 66.80.

EID PARRY: Now the stock is trading at the rate of 193 levels (17.11.2015, 11.10 am).one year low is RS 123.50, momentum indicators shows a positive trend in this stock. Certain seasonal news also creates an uptrend in this stock. We expect a rise from the current levels.

Bannari amman. Now the stock is trading at the rate of Rs 1186 ( 17.11.2015, 10.20 am).one year high of the stock is 1420 and that of One year low is Rs 594.70 The stock is trading in a positive territory, there is a bullish trend also. Technical view: RSI indicator after series of positive divergence continued its upward momentum with higher tops and bottoms and the MACD on daily chart. Positive divergence in histogram gave a bullish crossover which formed the Head of the Pattern. We expect a rise from the current levels.

Fundamental outlook:

Shares of Shree Renuka Sugars is now trading at 11% per cent higher at Rs 15.30( on 17.11.2015 Time 10.20). Among others, KM Sugar Mills trading with gains of 4.63 per cent to Rs 5.65, Bannari amman Sugar gained 8.04 per cent to Rs 1279 (17.11.2015 time 10.40 am) and EID Parry trading 5 per cent up today at Rs 200 level. Balrampur Chini is trading at 2 per cent up, Bajaj Hindustan up by 1 per cent and Sakthi Sugars up by 5.39 per cent. The sugar industry is also looking at better export prospects.

To boost exports and cut down domestic stockpiles, the government is also working on a solution to ensure that cash-starved mills make timely payments of over Rs 12,200 crore dues to farmers. This is expected to help balance sheets of sugar companies that owe large sums to the cane growers. Sugar mills owe Rs 12,000 crore, or nearly $1.82 billion, to cane growers, as sugar prices have fallen more than 20 per cent and cane prices have gone up by more than 50 per cent since the 2009/10 season. The domestic sugar marketing year runs from October to September. India's sugar exports are expected to rise after March 2016 when global prices are likely to rise following bad weather conditions in some parts of the world.

Perfomance of sugar stocks: Company Name Shree Renuka Bajaj Hind Balrampur Chini EID Parry Triveni Engg Dhampur Sugar Mawana Sugars Oudh Sugar Mill DCM Shriram Ind Dalmia Sugar Dwarikesh Sugar Bannariamman Uttam Sugar Simbhaoli Sugar Sakthi Sugars Andhra Sugar Rana Sugars Ugar Sugar Work Rajshree Sugars KM Sugar Mills Sir Shadi Lal KCP Sugar Dharani Sugars Piccadilly Agro Thiru Arooran Ponni Sugars(E) Empee Sugars

Last Price

Change 14.62 22.2 74.1 201.35 34.8 72.7 23.21 42.6 113.05 73.65 85.65 1,215.00 32.65 22 34.5 142 4.08 13.1 37 5.75 36 26.9 24.6 13.9 47.65 220 5.38

Net Sales (Rs. cr)

% Change 1.16 0.45 2.7 10 1.4 1.4 2.11 0.25 4.3 1.3 4.05 57.25 2.45 1.8 2.2 1.8 0.15 0.62 0.65 0.27 0.7 0.8 2.95 0.21 4.3 4.3 0.46

8.62 2.07 3.78 5.23 4.19 1.96 10 0.59 3.95 1.8 4.96 4.94 8.11 8.91 6.81 1.28 3.82 4.97 1.79 4.93 1.98 3.07 13.63 1.53 9.92 1.99 9.35

5,744.20 4,531.46 2,986.98 2,081.67 2,061.02 1,788.95 1,400.66 1,382.13 1,298.50 1,150.04 1,136.07 929.86 871.61 856.26 836.51 778.54 697.9 652.1 574.02 550.45 399.34 394.51 363.57 344.16 193.46 158.76 125.41

Date : 17.11.2015.

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