Balrampur Chini Is Systematix's Top Pick In Sugar After Ethanol Price Hike
However, contrary to market expectations, the prices of B-Heavy molasses and sugarcane juice-based ethanol remained unchanged, leading to disappointment.
Systematix singled out Balrampur Chini Mills Ltd. as a top stock pick in the sugar sector, as the company is well-positioned to benefit from favourable prices and the ongoing shifts in the ethanol production landscape, it noted.
The government has raised the price of C-Heavy molasses-based ethanol by Rs 1.69 per litre to Rs 57.97 per litre. However, contrary to market expectations, the prices of B-Heavy molasses and sugarcane juice-based ethanol remained unchanged at Rs 60.73 per litre and Rs 65.60 per litre, respectively, for the second consecutive year. This has led to disappointment as there were expectations of a price hike of Rs 1.8-2 per litre for these feedstocks, said Systematix.
The increase in CHM ethanol prices is expected to benefit distilleries using C-Heavy molasses as a feedstock, as it could enhance their profit margins.
On the other hand, distilleries relying on BHM and SCJ to produce ethanol may continue to face margin pressures. The government had raised sugarcane prices by 3-5% in the previous year, but it did not make similar adjustments to the prices of BHM and SCJ, leading to a challenging environment for distilleries using these feedstocks.
Additionally, companies that have invested significantly in expanding their distillery capacity for BHM and SCJ may see lower utilisation of these facilities, as prices have not been raised for these sources.
A new ethanol tender issued by the government for the period between Feb. 15 and July 31, 2025, reveals that only C-Heavy molasses and grain-based ethanol will be purchased. This move signals a clear preference for CHM and grain-based ethanol, further diminishing the attractiveness of BHM and SCJ-based production. Distilleries may shift their focus to producing CHM and grain-based ethanol, which offer better margins due to government incentives, the brokerage noted.
The rise in sugar prices, from Rs 37-38 per kg until December 2024 to Rs 39-39.5 per kg in January 2025, could lead to a boost in sugar production. The announcement of 1 million tonnes of sugar exports has provided an incentive for mills to maximise sugar output, taking advantage of higher prices and improved profitability in the sugar division.
While the price hike for CHM ethanol is a positive step for distilleries using this feedstock, the unchanged prices for BHM and SCJ-based ethanol may continue to weigh on the profitability of companies in the ethanol sector.
