Dwarikesh Sugar Q4 Results Review - Lower Profitability Negates Robust Ethanol Sales; FY24E Bright: Systematix

Systematix Research Report

Dwarikesh Sugar Industries Ltd.'s 12% YoY revenue growth in Q4 FY23 at Rs 5.3 billion came from strong performance across all segments, with the distillery segment posting 99% YoY, sugar 21% YoY and cogeneration 7% YoY growth. Ebitda margin contracted ~530 basis points YoY to 16.2%, as Ebitda fell 16% YoY to Rs 864 million, due to-

1. lower sugar volumes and muted sugar prices,

2. lower recovery, leading to higher cost of production, and

3. lower profitability in the distillery division.

Higher depreciation (9% YoY) and finance costs (9% YoY) along with low operating profit led to profit after tax slipping 22% YoY to Rs 468 million. Management cited Rs 1-2/kg rise in domestic sugar prices from April 01, 2023, with no major increase in costs.

We have thus raised our FY24E/FY25E Ebitda by ~12.5%/10%, to factor in the higher sugar prices, improvement in yields due to change in varietal mix, and stable costs. We have also raised earnings per share by ~16%/13% for the same period, respectively.

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