BAJAJ HINDUSTHAN LTD

Bajaj Hindustan ltd

As we know that the sugar industry is going through a lot of pain,recently they have participated in the upmove.Even if many of them appreciated more than 30 % in an average from that level,there is still chances in this sector for long term investors.Even now there is full of skepticism about this sector and these skeptics are looking only to the negative factors around and not considering the sharp correction in the prices of stocks from sugar sector.Let us take Bajaj Hindusthan which is one of the largest sugar producers in our country.Company having 14 sugar plants in India with a  crushing capacity of 136,000 TCD and has Industrial Alcohol/Ethanol producing capacity of 800 KL per day.It also having a co generation facility for producing 428 MW of power.Under three SPV’s ( Bajaj Energy Private Limited, Lalitpur Power Generation Company Limited, Bajaj Power Generation Private Limited )company is in the process of setting up thermal power capacity of 4410 MW in Uttar Pradesh.Its another subsidiary Bajaj Eco-Tec Products Limited (BEPL) is Manufacturing Medium Density Fibre (MDF) boards and Particle boards from sugarcane baggese. BEPL is expected to break even in next few years. This integrated nature of the company is reducing the risk of sugar price volatility to a certain extent. As all of you are aware, sugar companies are currently going through a difficult situation due to price erosion of sugar because of over supply situation.Now in whole sale market ,sugar is traded even below its production cost.But this situation is expected to change in coming years due to crop loss in major producing countries on account of weather conditions,shift of farmers to other crops..etc.In countries like Brazil more cane is expected to divert for ethanol production due to rise in crude prices. All these factors are pointing to a recovery in sugar prices in next few years.Being a company with huge capacity ,such a situation will immensely benefit Bajaj Hindusthan.In December quarter company posted a loss of Rs.45 Cr .Last year company collected 1,479.75 crore through a rights issue to part finance its various expansion programs and retire a part of its debt. A lot of sugar companies did extremely well during the 2003-2007 period when Mulayam Singh was in power. He had inaugurated a lot of these companies plus the procurement prices of sugar increased by 25% during his reign and currently in the Mayawati government, procurement prices of sugarcane has increased by 100% or so. So a lot of policies during that tenure were favoring them, there were a lot of incentives for the sugar mills. But in the current era there are a lot of incentives which were removed, so the market is expecting a favorable thing for sugar industry after the results of the UP elections.It is an excellent bet for long term investors..

CMP:-34.95

Target:-120 – 150 in next few years to come.

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