3 Sugar Stocks To Buy Now After Shares Come Crashing Down 10 To 15% (2024)

What the sugar order means?

The government imposed restrictions on sugar exports from June 1, a move aimed at increasing availability of the commodity in the domestic market and curbing price rise. "Export of sugar (raw, refined and white sugar) is placed under restricted category from June 1, 2022 onwards," the Directorate General of Foreign Trade said in a notification. However, it said that these restrictions would not be applicable on sugar being exported to the European Union and the US under CXL and TRQ. A specified amount of sugar is exported to these regions under CXL and TRQ. In a statement, the government said that with a view to maintain domestic availability and price stability of sugar in the country during sugar season 2021-22 (October-September), it has decided to regulate the sugar exports with effect from June 1.

Sugar company shares fall sharply

Over Tuesday and Wednesday, shares in sugar companies fell sharply. Roughly, the stocks of Avadh Sugar and Energy, Dhampur Sugars, Balrampur Chini lost about 10 to 15% in trade over the last few days. Along with this Renuka Sugars, Bajaj Hindustan and EID Parry stocks have also seen a sharp fall. The stocks have fallen very sharply over the last few days and yet some of the sugar companies stocks may turn attractive once again.

Sugar companies in a sweet spot, 3 sugar stocks to buy now

One of the biggest drivers for the sugar industry is the government's ethanol push, which has led to stronger demand for the distillery business. Apart from this for the exports market, one of the biggest drivers has been the reducing supply from Brazil. This has led to gains in sugar stocks over the last few years, though the sharp fall in the prices of sugar shares, has made them attractive once again. Among the stocks that investors can bet on is Bannari Amman, Balrampur Chinni and Magadh Sugars. Take the case of Magadh Sugars. The company's shares are down to Rs 308 from 52-week high of Rs 455. The company reported an EPS of Rs 32.66 for FY 2022, which translates into a p/e of just 10 times. Another stock to buy from the sugar space is Balrampur Chinni Mills. The company reported an EPS of nearly Rs 25 for FY 2022 and at the current market price of Rs 377, the stock trades at 15 times. However, going ahead the company is likely to be a big beneficiary of the ethanol push. About six months back the stocks of some of these companies were over valued, but, some of them have fallen 30 to 40% from 52-week highs making them attractive all over again. Dhampur Sugar Mills shares are at 52-week lows, but that is for the reason of a split in the company to two companies. The decline in prices of Dhampur sugar comes on the back of demerger news. Dhampur sugar has been demerged into two entities, Dhampur Sugar and Dhampur Bio Organics. Meaning, if you hold one stock of Dhampur sugar, now you will get one share each of the two companies. However, the demerger date is now over and investors who buy now, will not receive shares in Dhampur Bio. Overall, the fall in the prices of sugar stocks has made them attractive on account of rising price of sugar and the ethanol push.