Zuari Industries stock delivers over 300% returns in 4 years; is there more upside ahead?
Continuing their strong upward trend, shares of Zuari Industries (ZIL), the holding company of the well-established and diversified Adventz Group, spiked 4.8% in today’s trade, reaching a new 52-week high of ₹217.60 apiece. The stock has demonstrated significant gains in the last four weeks, gaining 40.36%.
It is worth noting that the stock has zoomed 101.4% from its March 2023 low of ₹104 apiece to trade at the current market price of ₹209.55. Long-term investors have also reaped impressive rewards, with the stock delivering a remarkable return of 319% over the past four years, climbing from ₹50 per share to its current position.
Zuari’s road to recovery
Despite this impressive performance, the stock is still trading 76.66% below its all-time high of ₹898 per share, achieved in 2010. Analysts at Arihant Capital Markets project that the stock may reach close to these levels.
In their latest note, the brokerage maintains its ‘buy’ recommendation on the stock, establishing a new target price of ₹671 per share.
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Adventz Group has engineering expertise and offers technical consultancy, project management, and contracting services for chemical, fertiliser, oil and gas, petrochemical, power, and other infrastructure projects. The group has ventured into real estate and aims to create world-class yet affordable homes and office spaces. Zuari Industries is the holding company of the group, and apart from having financial investments in the group’s operating entities, it also has SPE and real estate segments.
Investment rationale
The brokerage, in its report, has listed the following key factors:
Improving Performance of the SPE Segment (standalone): The earlier standalone sugar mill is now forward integrated with distillery and cogeneration operations that allows to derisk the highly regulated sugar business while benefiting from the Ethanol Blending Program backed by the government, said the brokerage.
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In FY23, the company’s revenue from the sugar segment surged by 31.3% year-on-year. It processed 13.3 million quintals of sugarcane at a recovery rate of 9.85%, resulting in a sugar production of 1.16 million quintals. This, according to the brokerage, was attributed to the higher diversion to B-heavy molasses for the production of ethanol as better prices for ethanol were realised for B-heavy and direct juice to ethanol conversion.
The distillery plant of the company produced 26.5 million litres of ethanol (26.2 million litres in FY22), whereas the cogeneration unit produced 102.25 million units of power and sold 79.39 million units to the Uttar Pradesh Power Corporation Limited (UPPCL), it said.
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Land Monetisation: With approximately 1,000 acres of land parcels held by ZIL and its associates, the company plans to monetise a portion of its land bank to reduce financial leverage, the brokerage noted.
The group, including ZIL and Zuari Agrochemicals, owns around 630 acres of land in South Goa. It has already generated ₹597 million in H1FY24 through the sale of part of its land, with additional sales planned to further alleviate the group’s debt burden.
Substantial Liquid Investments: The company holds a 20.05% stake in the listed associate Texmaco Rail & Engineering, along with significant stakes in other listed associates such as Zuari Agro Chemicals and Texmaco Infrastructure & Holdings.
Additionally, it has a marginal stake in Mangalore Chemicals & Fertilisers Ltd. According to the brokerage, the market value of the liquid assets alone is ₹19.15 billion, along with a diversified basket of private subsidiaries contributing to the group’s revenue.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Published: 18 Dec 2023, 03:22 PM IST
