It is in this backdrop that Shree Renuka Sugars Ltd announced its results for fiscal 2009 (year ended September). Its results reflect the combined effect of higher sugar production and higher realizations. The company’s strategy is unique, focusing on a higher share of refining capacity, compared with integrated sugar production. This reduces its investment, insulates it from seasonality as it can process raw sugar at any time, and reduces dependence on cane production.

In fiscal 2009, Shree Renuka’s sugar produced from cane declined by 28% to 377,750 tonnes but sugar processed from raw sugar jumped nine fold to 637,089 tonnes. Sugar output doubled as a result, and sugar sales rose by 50% during the year and by 48% during the September quarter. Realizations were higher by 66% and 84%, respectively.

Graphics: Yogesh Kumar / Mint

Shree Renuka’s stand-alone net profit doubled to Rs143.5 crore and its consolidated net profit increased by 91% to Rs225 crore. At Rs230, its share is trading close to its 52-week high, due to the favourable operating environment and its recent acquisition of a Brazilian sugar producer. It trades at about 12 times its projected fiscal 2010 earnings, which is reasonable given the positive factors.

A rising debt burden is a concern, as it is expanding capacity, and the Brazilian acquisition itself may add to consolidated debt. Any uncertainty caused by policy changes and the sugar shortfall turning into a surplus will be the key triggers to watch out for.

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