Venus Sugar Limited is a UP based company with principal activity to manufacture and market white and brown sugar. Its plant is located at Chandausi in distt. Moradabad, Uttar Pradesh.The installed crushing capacity of the mill is 3500 TCD of sugar cane.
During the fiscal year ended 30 June, 2008 (fiscal 2008), the Company crushed 2.134 Lakh tonnes of sugar cane and produced 0.203 Lakh tonnes of white refined sugar. However, the reduced availability of cane as well as shortage of funds and non remunerative prices of sugar forced the company to reduce their output in the FY ended 30 June’2009 ( fiscal 2009) when the company could produce only 0.1 Lakh tonnes of sugar.The average price realization in FY2009 was little less than Rs. 20/-per kg, which has now gone upto to Rs. 35-38/- per kg in the current season.
The company started crushing activity seven weeks back from 30th Nov. 2009. Though the availability of sugar cane is still not very good, the company is managing to procure and crush about 1500 T of cane sugar per day. In what may set a precedent ahead of the new crushing season, VenusSugar has managed to secure a Court order restraining the operation of kolhus (manufacturers of gur) in the cane area assigned to it bythe State Government. The Allahabad High Court, responding to a writ filed by Venus Sugar Ltd, has directed that no “illegal operation” of kolhus be permitted in the reserved/assigned area of its territory.This Court order has already increased the cane supply to the mill and is
likely to increase further.
Assuming that Venus Sugar will crush about 1500 TPD of cane for the season lasting about 110-130 days, then the total sugar production in the current season is likely to be 0.15 lakh tonnes which at present prices is worth Rs. 60 cr. and is likely to result in a net profit of Rs. 20- 25 crores at the year ending June’2010.Thus the company is likely to report an EPS of Rs. 5-6 in the FY ending JUNE 2010..
On the balance sheet front, the company has negative reserves due to its accumulated losses. However the replacement value of the plant is about Rs. 80 cr (besides its land,building etc.) which after paying off the total debt on its books,gives the enterprise value of the company at Rs. 50 cr,vs. its present market cap. of less than Rs. 20 crores…
With bright prospects for sugar industry in the next 2 years,and diversification into Power and production of ethanol for blending with petrol; Venus Sugar stock appears very attaractive in short to medium and long term.
BUY is recommended at CMP of Rs. 5.
Note : Most of the inputs by Industry expert Mr. Dinesh Goel
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