Analysis of Sree Renuka Sugars Ltd (SRSL)
Company Overview
Renuka sugars was started in 1995 and by acquiring a sick sugar unit in AP in 1998 it gained a capacity of 1250 TCD.Then the unit was moved to munoli and its capacity was expanded to 2500 TCD.Commisioning and trial production took place in the year end of 1999.
A distillery and ethanol plant of 60kl per day capacity was added in 2002. The sugar refinery was set up to process raw sugar to produce refined sugar meeting European specifications.
The Company plays a key role in exports/imports due to its coastal position. SRSL is the single largest exporter out of India in 2006 -07 in its current export campaign and was the largest importer of raw sugar during the import campaign of 2002 – 03.
| Product Mix | |||
| Power | Ethanol | Bio-Fertilisers | Sugar |
| Bagasse is used to produce power. | It is produced from molasses. | Residue of distillery. | From sugar cane. |
Current Capacity of SRSL
| Unit | Cane (TCD) | Cogeneration(MW) | Distillery(KLPD) | Refinery(TPD) |
| Munoli | 7,500 | 35.5 | 150 | 1,000 |
| Athani | 6,000 | 38 | 150 | 1,000 |
| Havalgah | 4,000 | 150 | ||
| Ajara | 2,500 | |||
| Arag | 4,000 | 15 | ||
| Aland | 1,250 | |||
| Haldia | 15 | 2,000 | ||
| Total | 25,250 | 103.5 | 450 | 4,000 |
SRSL has the largest sugar refining capacity in India of 4000 tons per day (TPD), two 1000TPD each refineries integrated with its plants at Munoli and Athani and a 2000 TPD port based refinery coming up in Haldia SRSL has acquired a majority stake in KBK, an engineering company primarily engaged in providing turnkey solutions in the field of distilleries, Ethanol plants and bio-fuels.
Acquisition Strategies
SRSL has also acquired a standalone distillery of 100 KLPD from Dhanuka Petrochem located at Khopoli, Maharashtra. The Company has set up a wholly owned subsidiary viz. Shree Renuka Biofuels Holdings FZE in Sharjah International Free Zone (SAIF Zone) for its overseas investments. The company is working on other acquisitions, expansions and lease opportunities to strengthen its existing strong fundamentals and growth prospects.
Financials
SRSL revenues have increased at a CAGR of 42.85% and their Profit after tax has increased at a CAGR of 114.62% over a period of 3 years from FY 2001 till FY 2004. They have achieved a turnover of Rs. 5,184.35 million in 9 month period ending June 30, 2005, as compared to Rs. 2,116.57 million in 9 month period ending June 30, 2004, which is an increase of 144.94%. Their adjusted profit after tax was Rs. 320.55 million in 9 months ending June 30, 2005 as compared to Rs. 98.84 million in the 9 month period ending June 30, 2004, which was an increase of 224.31%
| RATIOS | SEP07 | SEP06 | SEP05 | SEP04 | SEP03 |
| Operating margin (%) | 14.54 | 12.38 | 10.54 | 13.35 | 6.54 |
| Gross profit margin (%) | 11.42 | 11.35 | 9.34 | 10.43 | 4.54 |
| Net profit margin (%) | 6.72 | 6.44 | 6.09 | 5.02 | 0.87 |
| Current ratio | 2.20 | 2.03 | 1.20 | 1.31 | 2.46 |
| Material cost component (% earnings) | 58.32 | 76.71 | 78.79 | 76.74 | 81.57 |
Analysis
We can see that there is a continuous uptrend in operating profit margin gross profit margin and net profit margin. Its a good sign as for as company is concerned.
In 2006-07 supply of sugar exceeded demand and hence there was a deep price cut in sugar cane and hence material cost has done down drastically which also added to increase in profit margin.
When you see current ratio a ratio of 2:1 is always good but as for as this industry is concerned which is based on agricultural commodity its going up more than two means either it has unutilised cash or inventory which can be utilised in proper mode. But anyway it’s not too high but further growth has to be prevented.
Its P/E is also around 50 in the market shows that investors are over bullish about this stock.
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