I generally avoid sugar shares but if you really want to buy, buy Dhampur Sugars.
I believe most of the sugar stocks have gone consistently up in the last year and most of them have exceeded their face value, so there is a correction due. Dhampur Sugar’s CMP/BV is about 2.01 as of now which is quite Ok compared to the rest of the peers.
Also do not buy it now. The STOCH (14) is about to cross as well as the Bollinger band have been broken. You can expect to come down in the following week (80% probable case). Buy in that dip.
Sell fast within 2–3 days.
- Promoter’s stake has decreased significantly
- Have huge liabilities (So does other sugar companies)
Shares of all good sugar companies have their price soared this year. The reason is high sugar price due to low production and other political issues which resulted in the appreciation.
Do not invest right now –
- Sugarcanes will be available as their season is October-December.
- The government may crack down on prices following the rapid increase in recent months. It will cause a huge panic.
- Sugar prices have been a politically sensitive issue for the government. Government may slice high prices ahead of the Assembly elections in Uttar Pradesh next year.
- All shares are trading at extremely higher than their book value. Upper Ganges has its CMP at 15 times than its book value where the rest of the industry (except Dwarikesh Sugar) is trading at 2–2.5 times more than its book value.
All sugar companies have low return on equity. I think there will be a dip down which affects Dwarikesh Sugar and Upper Ganges the most!