Dwarikesh Sugar Q3 Review - Higher Raw Material Cost, Lower Sugar Volumes Hurt Profitability: Systematix

Systematix Research Report

Dwarikesh Sugar Industries Ltd.’s revenue fell 36% YoY in Q3 FY23 to Rs 3.8 billion, due to weak performance in the sugar segment (revenue down 35% YoY).

Healthy growth in the ethanol segment (up 66% YoY) and modest 3% YoY growth in the cogeneration segment partly offset the decline in sugar. Ebitda fell 52% YoY to Rs 265 million, with Ebitda margin tumbling ~225 bps YoY to 6.9%.

We attribute the decline in Ebitda to-

1. lower brought forward sugar stock, which caused sugar sales volumes to fall, and

2. higher cost of production, resulting from higher cane price and lower recovery.

Higher depreciation (21% YoY) and finance costs (54% YoY) along with low operating profit led to 64% fall in profit after tax at Rs 105 million.

As per Dwarikesh Sugar's management, operations at both distilleries this season commenced with sugarcane juice /syrup as feedstock. We have cut our Ebitda estimate by ~17%/5% for FY23E/FY24E, to factor in nine months-FY23 performance.

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