Buy Sugar Stocks
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Stock market today: Following reduction in goods and services tax (GST) on sugar from 18 per cent to 5 per cent in 48th GST Council meeting and central government's target to double ethanol blending from existing 10 per cent to around 18 to 20 per cent by end of 2023 have suddenly made sugar stocks sweeter among the Dalal Street bulls. Sugar stocks namely Dalmia Bharat Sugar, Dhampur Sugar, Bajaj Hindusthan Sugar, Shree Renuka Sugars, Dwarkesh Sugar, etc. have been attracting huge buying interest since stock market's opening bell today.
Speaking on the reason for sugar stocks turning sweeter today, Avinash Gorakshkar, Head of Research at Profitmart Securities said, \"In the 48th GST council meeting held recently, the central government has declared reduction in GST on sugar from 18 per cent to 5 per cent. Market is buzz that it would lead to rise in business volume of sugar that will improve margins of the sugar companies. However, this is a short term trigger that is going to fade shortly.\"
Avinash Gorakshkar of Profitmart Securities said that there is a long term trigger working in favour of sugar stocks and that trigger is central government's target to double its ethanol blending from existing 10 per cent to around 18 to 20 per cent by end of 2023. So, demand for ethanol from sugar companies are expected to remain for long term and hence any dip in quality sugar stocks should be seen as buying opportunity by positional long term investors.
Sugar stocks to buy todayOn sugar stocks to buy today, Ravi Singhal, CEO at GCL Securities said, \"Crude oil prices are cooling down these days and it may lead to profit booking in sugar stocks as demand for ethanol blending may go down due to dip in oil prices. However, this dip can be a good opportunity for positional long term investors who want to add sugar stock in their portfolio. Such stock investors can think of adding Balrampur Chini Mills and EID Parry shares in their portfolio.\"
Sugar stocks have been nosediving for near one month after Government of Indian (GoI) levied excise duty on sugar export. Quality sugar stocks like Dhampur Sugar Mills, Mawana Sugars, Dwarikesh Sugar Industries, Shree Renuka Sugars, EID Parry, etc. have corrected heavily from its respective 52-week high.
In the world of commodities, crude oil gets the headlines and gold bullion gets the infomercials, but sugar is often left out in the cold. A prime example of this is the severe decline in sugar prices. Since the beginning of October, its market value has dropped 18%. Did it cause a media uproar Did Pat Boone urge investors to buy sugar stocks because of an imminent confiscation of sweets by the federal government
Along with that point, there are not too many \"pure\" sugar stocks. As of this writing, only three direct plays exist: iPath Bloomberg Sugar Subindex Total Return ETN (NYSEARCA: SGG ), Teucrium Sugar Fund (NYSEARCA: CANE ), and iPath Pure Beta Sugar ETN (NYSEARCA: SGAR ).
Here's the kicker, though - sugar stocks aren't just limited to funds tracking the actual commodity's spot price. Rather, they include companies that procure tons of sugar as an integral part of their core business. Food makers, in particular, those specializing in confectioneries and sweetened goods, stand to gain significantly from the sugar deflation. For these sugar stocks, every basis point lost in the commodity markets means an incremental addition to profitability margins.
Best of all - at least from their perspective - sugar deflation is likely to be an ongoing reality. The U.S. Dollar Index shows no sign of abating, actually jumping up 2% for the month so far. A stronger greenback will inevitably weigh on all commodities. Then there's the whole matter of the U.S. Federal Reserve. If Fed chair Janet Yellen pushes a hawkish policy as many are anticipating, it's going to be a long day for sugar bulls.
That suits consumer-centric sugar stocks just fine. Declining prices benefit the bottom line, which in turn allows for extra resources to grow the top line. Here are three confectionery companies that can boom on cheap sweets!
Recently, HSY indicated that they were exploring the idea of replacing high-fructose corn syrup with sugar in certain products due to shifting consumer tastes. Of course, high-fructose corn syrup has generated a lot of controversy because of its unhealthy attributes. Food companies love it, though, because it is a low cost alternative to sugar.
That's momentum that I expect to continue well into 2017 and beyond. A cursory look at the financials for TR reveals a wealth of positives. It has a cash-rich and stable balance sheet. Free-cash flow is consistently high and fueling its daily operations. Profitability margins are in the upper echelons of sugar stocks, and the deflationary sugar trend will definitely lift all boats.
Admittedly, Rocky Mountain Chocolate Factory, Inc . (NASDAQ: RMCF ) is one of the sugar stocks that's laced with spice. It's a speculative opportunity trading in the dark alleyways of the Nasdaq Index .
Mix in the fundamentals, and RMCF sheds some of its speculative image. For one thing, its balance sheet is fairly stable and it maintains consistent free cash flow. Its profitability margins are ranked in the upper half among sugar stocks, and its trailing three-year revenue growth is quite favorable. Declining sugar prices will just make it more easier for Rocky Mountain to accentuate its strengths.
Water and the monsoon are key factors affecting the sugar business, and Maharashtra, Karnataka, and Uttar Pradesh account for 89% of production. India is not only among the top three producers of sugar worldwide, but it also consumes the most sugar globally. As a result, despite the market uncertainty brought on by the ongoing war and the epidemic, future predictions for the sugar business appear to be somewhat optimistic.
The second-largest agro-based industry in India is the sugar sector. The sector supports about 50 million farmers. But, on the other hand, the sugar sector also directly employs over 6 lakh people and indirectly supports many more.
However, the sugar sector in India has a considerably more prominent worldwide role to play. India is the world's second-largest producer of sugar. After Brazil, the nation produced 29 million metric tons of sugar.
Maharashtra is regarded as the nation's leading sugar producer among these state. 20% of sugar is produced from sugar beet, while 80% comes from sugarcane extraction. The majority of the sugar used in India is made from sugarcane. The erratic nature of sugar output directly impacts the price of sugar.
The administration has set the goal of integrating 10% ethanol under the EBP by 2022 and 20% by 2025 in order to support this. Since it can now use the extra ethanol generated as part of the EBP program and profit from higher margins, the sugar industry has significantly profited.
The last area or part of the sugar industry is the market expansion for soft drinks. The approximately two-fold increase in per capita consumption of soft drinks over the past few years has given the sugar industry another big boost.
Agribusiness and bioenergy firm Shree Renuka Sugars Limited (SRSL) runs sugar refineries and mills. The product line offered by the corporation comprises sugar, ethanol, electricity, and organic manure.
In addition, it runs distilleries that use molasses and rectified spirits as biofuels to create ethanol and alcohol suitable for vehicles. Additionally, the business produces power from bagasse, a sugar industry waste product, for internal use and sells any excess to state grids in Brazil and India.
With its headquarters in Chennai, Tamil Nadu, East India Distilleries (EID) Parry Limited is an Indian public corporation that has been in operation for more than 225 years. As a result, it is often found in the top sugar shares list.
Its accomplishments include the first fertilizer manufacture in the Indian subcontinent (1906), among many other firsts. Currently, the firm is involved in the production and distribution of sugar and bioproducts. The oldest commercial name still in use in Chennai is Parry's.
The Balrampur Chini Mills Limited (BCML) company was established on July 14th, 1975. It is a significant integrated sugar manufacturer in India. The Company produces and sells sugar primarily. It is a renowned company in the stock market and is considered a top choice by many traders.
More than 1 Lac farmers trust Dalmia Bharat Sugar and Industries Limited, one of India's fastest-growing sugar companies. The corporation entered the sugar industry in the middle of the 1990s, and in 1994 the first facility, with a capacity of 2500 TCD, was established at Ramgarh, a hamlet in the Sitapur region of Uttar Pradesh.
Sugar is volatile and has a high level of market unpredictability. However, despite this volatility, the sugar business considerably impacts the country's GDP and provides revenue to the federal and state governments.
Sugar stocks have been on a roll this year. Many sugar stocks have appreciated more than 100 percent in 2021. Exuberant retail investors have been accumulating sugar stocks. Some institutional investors too have been buying. Will this investment turn out to be sweet
Sugar is a cyclical industry. The fortunes of the industry ebb and flow with sugar prices, which in turn depends on sugar production and supply. With demand almost stable, fluctuations in production/supply causes prices to rise and fall. Particularly, crop failures in the world's largest producer Brazil, trigger sharp price rise. The industry does well when prices rise. But higher prices encourage farmers to grow more cane. In India, since farmers are assured of Minimum Support Prices (MSP), there is not much of a risk in growing more sugar. With incentivized farmers growing more, supply increases and prices fall. The cycle repeats. 59ce067264