COMPANY OVERVIEW:
Company was incorporated in 1931 in Mumbai. The company manufactures sugar and allied product.
Bajaj Hindustan Ltd (BHL) is part of the ‘Bajaj Group’, is India’s number one sugar and ethanol manufacturing company.
All the sugar plants of the company are located in northern Indian state of Uttar Pradesh (UP).BHL has ten sugar plants located in the northern Indian state of UP with the aggregate sugarcane crushing capacity of 96000 tcd (tones crushed per day).
BHL`s subsidiary, Bajaj Hindustan Sugar and Industries Limited (BHSIL) has total crushing capacity 40000 tcd. With this BHL Group as a whole will have an aggregate sugarcane crushing capacity of 136000 tcd.
The group has a distillery capacity to produce 800000 liters of Alcohol per day.
BHL generates 397 MW of power from the bagasse produced in its sugar mill. The company sells surplus power of 90 MW to the UP state electricity board.
BHL also has the wholly owned subsidiary, Bajaj Eco –tec Product Limited (BEPL) which has commenced trial production of environment friendly Medium Density Board(MDM) and Particle Board(PB).

INVESTMENT LOGIC:
Expansion in place to take advantage of upturn: Over the last 2-3 years ,BHL augmented its sugar capacity by 7000 tcd to 96000 tcd .BHL set up two distilleries, each of 160 klpd,totaling capacity to 640 klpd. Capacity of sugar plant of its subsidiaries have been augmented from 6000 tcd to 40000 tcd and new distillery was set up with capacity of 160 klpd and surplus power of 15 MW.
Alternate use of Bagasse more profitable: BHL has recently ventured into manufacturing of Particle Board (PB) and Medium Density Fiber (MDF), which forms alternate use of bagasse.

INVESTMENT RISK:
Higher cane price.
Highly leveraged company with debt: equity ratio of 2.5 at present.
Higher interest payment would lower the profitability.

SECTOR OUTLOOK:
Domestic sugar balance: Domestic sugar balance is tighter than implied by current stock price; we see potential for inventory levels to decline in FY10,to less than 2 months of consumption.
Import of sugar inevitable.
Tighter credit: Tighter credit condition and slower growth are likely to constraint the supply side, reducing input usage and slowing capital investment, keeping the sugar market in deficit.

	NO.OF SHARES	%OF TOTAL
PROMOTER	65637539	46.42%
INSTITUTION	31505527	22.28%
GENERAL PUBLIC	44264045	31.30%
GRAND TOTAL	141407111	100%

	31/03/07	31/03/08	31/03/09(E)	31/03/10(E)
REVENUE	1780	2111	2554	2891
GROWTH		18.50%	21%	13.20%
EBDITA	190	335	511	623
PAT	-103	-447	435	1830
EPS	0.1	-3.2	3.1	13
GROWTH		-3300%	-197%	320%

We assumed cost of cane Rs140 per quintal for FY2009 and Rs 145 per quintal for FY2010. We have revised sugar realization from Rs17 per kg to Rs19.5 per kg in FY2009 and Rs 20.5 per kg in FY2010.

VALUATION:
At CMP of Rs52 company is trading at 4 xs to the FY2010E earning. We expect the PE multiple to be around 8x, this translate into the price of Rs 104. FY2010E EPS is around 13.

CONCLUSION:
The investment horizon should be at least 1 year to get the maximum benefit out of the uptrend in sugar cycle.