A focus on augmenting production, supportive measures by the government, lowering domestic inventories and ethanol blending have prompted Sanjay Manyal of ICICI Direct to stay upbeat on the sugar sector.
The larger focus is on the Uttar Pradesh-based millers due to better yields and availability of water, the research analyst at the brokerage told BloombergQuint's Niraj Shah during a BQ Edge event.
Sugarcane juice- and B-heavy or second-grade molasses-based ethanol, according to Manyal, is more profitable compared to C-heavy ethanol. But companies would maximise diversion of sugarcane towards B-heavy ethanol until prices remain below Rs 40 a kg, he said, outlining business model and efficiency of some of his preferred stocks without recommending any.
Manyal also sees scope on account of introduction of vehicles using flex-fuel—a combination of gasoline and methanol or ethanol—grain-based ethanol and ethanol-blending with diesel.
Watch the full interview here:
Related Coverage: BQ Edge
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