Buy EID Parry; target of Rs 520: Axis Direct
Axis Direct’s research report on EID Parry
EID reported Q2 PAT of ~800 mn, flat YoY. Cane availability dropped 46% YoY leading to a cascading effect on production and sale of sugar and downstream products, mitigated to some extent by higher sugar realization (+10 YoY) and import of raw sugar. SS16-17 concluded with closing industry stock of 4 MT unevenly spread across country (South has shortage) – Opening stock of 7.7 MT, production at 20.3 MT, import at 0.5 MT, consumption at 24.5 MT.
For FY18, EID expects 13-14% decline in cane crushed; average recovery of 10%. Sugar expected to be firm at Rs 37-37.5/ kg. We believe the stock will continue to rerate, as both Coromandel and sugar operations deliver. We reiterate BUY with a revised SOTP-based TP of Rs 520 (Rs 480 earlier).
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