Avadh Sugar & Energy LtdQ1 FY24Agricultural Food & other Products

Avadh Sugar & Energy Ltd

Q1 FY24 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Yes

Order

N/A

Capex

Yes

2 of 4 growth signals are positive.

Revenue guidance

Category 3

→Crushing volume for sugar season '23-'24 was 534 lakh quintals, down 11% from '22-'23 (602 lakh quintals).
→For the upcoming season '24-'25, production is expected to be similar or slightly higher, with improved crushing at Hargaon (expected 200 lakh quintals), Hata (115 lakh quintals), and Rosa (+ growth), Seohara expected to be slightly higher despite past floods.
→Capex of around INR 300 crores over the next 2-3 years aimed at expanding capacity:
→ - Hargaon crushing capacity increase from 10,000 to 13,000 TCD with improved steam efficiency.
→ - Rosa multi-feed distillery addition of 100 KLPD ethanol capacity, increasing total ethanol capacity from 325 to 425 KLPD.
→Expected EBITDA sustainable at INR 300 crores.
→ROCE from new projects targeted at ~25-27%, up from 15-17%.
→Revenue growth linked to higher crushing, better efficiencies, and expanded ethanol production capacity.

Category 3

→The company expects sustainable EBITDA of around INR 300 crores annually under current policies.
→Planned capex of approximately INR 300 crores over the next 2-3 years (Hargaon and Rosa plants) aims to enhance crushing capacity and efficiency.
→Hargaon expansion project (INR 151 crores) targets increasing crushing capacity from 10,000 to 13,000 TCD, reducing steam consumption from 42% to 31-32%, yielding higher bagasse savings.
→Rosa multi-feed distillery project (INR 147 crores), pending government clearance, will add 100 KLPD ethanol capacity, enabling use of molasses and grains.
→Expected ROCE on new projects is around 24-27%, significantly higher than current 15-17%.
→These projects are expected to add approx. INR 72-75 crores in annual EBITDA.
→Government subsidies on bio-gas extraction from press mud offer additional revenue streams.
→Overall, enhanced operational efficiency and diversified product mix indicate steady growth in profits and EPS over the next 2 to 3 years.

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Yes

→The company has two major capex programs planned: ₹151 crores for capacity enhancement at Hargaon and ₹147 crores for a multi-feed distillery at Rosa, totaling close to ₹300 crores over the next 2 years.
→They expect to borrow around ₹100 crores for the Hargaon project, but actual borrowing will depend on cash flow and liquidation of inventory.
→The company aims to not increase overall borrowings significantly as they have repayments of ₹95 to ₹111 crores annually over the next 2-3 years.
→They are focused on reducing debt and enhancing financial flexibility through prudent financial management rather than relying on debt-driven expansion.
→No explicit mention of equity fundraising was made in the provided transcript; the emphasis is on sustainable growth and possible debt-taking contingent on circumstances.

→For ethanol supply to OMC, Avadh Sugar & Energy has received orders for 3.64 crore liters for Q1 and Q2 of FY25.
→They have supplied 3.42 crore liters in Q1 and Q2 (about 95% fulfillment), with the remaining quantity deferred to Q3 and Q4.
→Orders in hand for Q3 and Q4 also stand at 3.64 crore liters.
→Orders are contingent on availability of molasses feedstock, which is currently limited due to production of lower-yield C molasses.
→Overall, Avadh has restricted tenders based on available molasses inventory up to October 2024.
→The company is working on retrofitting distilleries for multi-feedstock (including maize) use to stabilize ethanol production and fulfill orderbook in future quarters.

Yes

→Capex at Hargaon plant: INR 151 crores to increase crushing capacity from 10,000 to 13,000 TCD and reduce steam consumption from 42% to ~31-32%, improving bagasse saving by ~4.5%. Completion expected by 2025-2026 with benefits starting Nov 2025.
→Rosa multi-feed distillery plant: INR 147 crores investment, capacity 100 KLPD; awaiting government approval expected by September 2024. Plant to start operations by end of FY 2025-26. This will enable use of molasses and grain feedstock.
→Total capex over next 2-3 years is approximately INR 300 crores, aiming for ~25-27% ROCE.
→Focus on prudent financial management: may borrow around INR 100 crores for Hargaon project but overall debt expected to be stable due to repayments.
→Also exploring new technology for biogas/CNG from sugarcane press mud; currently in feasibility and study stage with potential projects involving Balrampur and Dhampur Sugar.

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