Today’s Trading Playbook
KEY THEMES
Yesterday, the government has raised the price of subsidized sugar in Egypt by EGP2,000 per ton to EGP10,500 from EGP8,500 currently. The decision was attributed to higher global prices in general, as raw sugar prices jumped c.57% since H1 2020.
We believe the decision will be very beneficial to Delta Sugar [SUGR], given its strong contribution to the local market, and the subsidized sugar segment in particular. We note that in 2020, SUGR has sold a whopping 427,000 tons, mostly at prices below EGP6,500 per ton. Furthermore, we calculate that during 9M 2021, SUGR has sold nearly 237,000 tons, at an average price of EGP7,360 per ton.
For SUGR, the question is whether this hike is a temporary measure, or the company will see a relative stability in its selling prices at current levels. We have previously set a PT for SUGR at EGP14.5/share in our Trading Playbook dated 12 July 2021. In view of the recent updates, we think hiking local subsidized prices could take our PT for SUGR to a range between EGP21-23/share, offering an average upside potential of 65% from yesterday’s close.
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