Sugar

Sector Overview Sharply surplus mathematical product Indias sugar production in India is judge to cross 27mt in SY07 taking s discharge inventories (end Sept-07) to over 50% of before demand. Subdued prices In this context, domestic prices be expected to continue subdued we see infinitesimal hope for a meaningful change beyond authentic directs of Rs13.5/kg (UP). Closed merchandise opportunity Export market profitability ashes muted because of poor international prices and the strong rupee the export reward is incredible to help oneself meaningfully. Government interpolation will not help meaningfully Buffer sugar strainings low the government whitethorn be increased to 5mtpa from 2mtpa. This increases profitability by < Re0.5/kg on general sales base fountainhead below the Rs2/kg loss at ebit directs currently macrocosm suffered by these players. extra policy hit for UP players removal of the 2004 UP subsidy scheme is an additional uncertain ty for players in UP taking away Rs0.5-0.8/kg in get on the general sales base. BJH is most impacted (Rs0.7-0.8/kg) among the top three (BRCM, TRE at Rs0.5-0.6/kg). A new scheme is expected to be announced in the next few weeks just now clams propped up on subsidy dole-outs may not enthuse markets much. Co-product income will go through a base level of cash flows but we see attempts of further downgrades in BJH and BRCM to boilersuit losses in FY07. Sugar cycle black mettle is cool it 4-6 quarters away A recovery in profits and stock performance will have to dwell for a reversal of the sugar cycle. The nature of the cane habilitate (ratoon) might ensure that SY08 production remains high as well ensuring that much(prenominal) a trigger is a year away. Further, sugar cane remains the most lucrative coif for a farmers perspective is payments are timely. If cane price arrears are reduce due to mill subsidies, buffer stocks etc, the cane crop arena in SY08 may not be meaningfully note despite the recent dur! ess (payment arrears) that farmers have faced. This increases the risk of an...If you take to get a full essay, order it on our website: BestEssayCheap.com

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