Recommendation from Power generation and Sugar Sector

The scrips in this column have been recommended with a 15-day investment horizon in mind and carry high risk. Therefore, investors are advised to take into account their risk appetite before investing, as fundamentals may or may not back the recommendations.

Power Grid Corporation of India Limited

CMP - ₹ 238.70
BSE CODE 532898
Volume 3,56,000
Face Value ₹ 10
Target ₹ 250 — 257
Stoploss ₹ 229 (CLS)

Power Grid Corporation of India (Power Grid) is an Indian state- owned electric utility company headquartered in Gurugram, India. The company is a ‘Maharatna’ central public sector enterprise and is also a central transmission utility (CTU) of India. Analysing the quarterly performance, net sales for Q3FY22 stood at ₹ 10,446.88 crore as opposed to ₹ 10,142.48 crore in Q3FY21, a slight increase of 3 per cent. The operating profit was also slightly higher at ₹ 9,394.00 crore in Q3FY22 as compared to the operating profit of ₹ 9,131.54 crore in Q3FY21. Net profit reduced by just 0.06 per cent in Q3FY22 and was reported at ₹ 3,309.59 crore as compared to the net profit of ₹ 3,311.62 crore reported in Q3FY21. Looking at the strong business outlook, project execution and continuously growing portion of renewable energy in its portfolio, we see strong growth potential in the business. However,rising fuel costs may put margins under pressure in the near term. We recommend BUY.

Balrampur Chini Mills Limited

CMP - ₹ 420.65
BSE CODE 500038
Volume 1,47,415
Face Value ₹ 1
Target ₹ 460 — 473
Stoploss ₹ 390 (CLS)

BCML is the second-largest sugar manufacturing company in India with significant strength in the manufacture of downstream products like power (co-generation) and ethanol. Analysing the quarterly performance, its net sales for Q3FY22 stood at ₹ 1,212.15 crore as opposed to ₹ 1,072.16 crore in Q3FY21, a marginal increase of 13.06 per cent. The operating profit was substantially on the higher side at ₹ 111.40 crore in Q3FY22 as compared to the operating profit of ₹ 47.53 crore in Q3FY21, posting an increase by 134.4 per cent. Net profit jumped and was reported at ₹ 58.30 crore in Q3FY22, higher by 177.18 per cent as compared to the net profit of ₹ 21.03 crore reported in Q3FY21. With distillery capex, BCML would be able to increase its ethanol volumes 2.2 times to 35 crore litres by FY24. It is undertaking modernisation and de-bottlenecking at some plants. This would lead to higher sugarcane crushing, better recoveries and, in turn, lead to stronger revenue growth. Hence, we recommend BUY.

(Closing price as of May 17, 2022)