Scripscan:Uttam Sugar Mills Ltd
BSE code:532729
cmp:75
Story:The Group's principal activity is to manufacture both double sulphated as well as pure white sulphurless sugar. The Company's plant is located at Libberheri in Uttatanchal. The company's capacities are concentrated in Uttaranchal and West Uttar Pradesh, where substantial new capacities are set to come up over the next couple of years, aided by the UP Government's capital subsidy programme. This region is already characterised by severe competition for cane and the concentration of capacities may acerbate the problem. This could push up procurement costs and create problems of cane availability, either of which can delay contribution from the expanded capacities. Second, though the company has diversified into power and has refining capacity to handle raw sugar, it does not have the capacity to process sugar into ethanol.This could reduce the valuation that this stock would enjoy in relation to fully integrated sugar producers with similar capacities. The economics appears to be in favour of producers who have fully integrated facilities with a three-way linkage between sugar, ethanol and co-generated power.Integration into ethanol appears particularly attractive now, with the market for bio-fuels expanding in a big way.For those looking to ride out the uptrend in the sugar cycle, there are better and bigger companies in the sugar sector with robust growth prospects available at more attractive multiples. Therefore, there appears to be no compelling reason to go for uttam sugar.
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