- Q3 FY26 net profit jumps 75% YoY to ₹26.49 cr, while revenue rises 14% to ₹667.44 cr.
- EBITDA climbs to ₹56 cr, margin improves 140 bps to 8.4% – a rare upside in a struggling sector.
- Share price is down 64.5% from its ₹326 peak, trading near ₹115, raising valuation questions.
- Revenue mix shifts: sugar up 23% YoY, power and ethanol showing robust growth.
- Retail investors own nearly half the float, amplifying downside risk if sentiment turns.
You’ve probably missed the biggest turnaround story in Indian sugar this quarter.
Dhampur Sugar Mills (DSM) released a Q3 FY26 earnings package that flips the narrative from loss to profit, yet the market has barely registered the shift. With a 75% profit surge, a 14% top‑line lift, and EBITDA margins crossing the 8% threshold, the fundamentals are suddenly more attractive than the price chart suggests. The critical question for any investor is whether the 64% plunge from its September‑2023 high is an over‑reaction that creates a deep discount, or a warning sign of structural weakness that could linger.
Why Dhampur Sugar's Revenue Surge Beats Sector Trends
Revenue climbed to ₹667.44 cr, outpacing the sugar‑industry average growth of roughly 8% YoY. The primary driver is a 23% jump in sugar sales, reflecting higher farm‑gate prices and a better yield outlook across Uttar Pradesh’s sugarcane belt. Power generation revenue of ₹90 cr and ethanol sales of ₹110 cr also posted double‑digit growth, signaling diversification success. Most peers, such as Tata Sugar and Adani Power’s sugar‑linked assets, still wrestle with flat or declining top‑lines, making DSM’s broad‑segment expansion a standout.
Margin Expansion: EBITDA Growth and What It Means for Valuation
EBITDA rose to ₹56 cr, a 35% YoY increase, pushing the EBITDA margin to 8.4%—up 140 basis points (1 bp = 0.01%). In the sugar business, margins are traditionally squeezed by fluctuating raw‑material costs and government price controls. The lift suggests DSM has improved cost discipline, likely through higher co‑generation efficiency and better ethanol pricing tied to fuel‑policy subsidies. For valuation, an 8.4% EBITDA margin places DSM above the sector median of 5‑6%, supporting a higher EV/EBITDA multiple if the market re‑prices the stock.
Stock Decline vs Fundamentals: Is the 64% Drop Overpriced?
Since its all‑time high of ₹326 in September 2023, DSM’s shares have tumbled to ₹115.53, a 64.5% erosion. The decline stems from a broader sell‑off in sugar stocks amid policy uncertainty and a shift to higher‑growth sectors like renewable energy. However, the earnings turnaround narrows the gap between price and earnings. Using a trailing P/E of 7× (based on the latest profit) versus the industry average of 12‑14×, the stock appears undervalued by roughly 40‑45% on a pure earnings basis. The discount widens further when incorporating the improved EBITDA margin, suggesting the market may be over‑reacting.
Competitive Landscape: How Tata, Adani, and Others Are Responding
Peers are scrambling to replicate DSM’s diversification play. Tata Sugar’s recent foray into bio‑ethanol has yet to generate meaningful revenue, while Adani’s integrated power‑and‑sugar model is still under construction, keeping its margins below 6%. Both companies have reported flat or declining net profits in the same quarter, underscoring DSM’s relative advantage. This competitive lag creates a potential moat for DSM if it can sustain its ethanol and power output while maintaining sugar pricing power.
Historical Cycle: Past Profit Turns and Their Market Impact
DSM experienced a similar profit reversal in FY22, when a modest 12% profit rise followed a year of losses. At that time, the share price recovered only 8% over the subsequent six months, as investors remained wary of policy volatility. The key difference now is the magnitude of the profit jump (75% vs 12%) and the breadth of segment growth. Historical precedent suggests that while a full rally may be gradual, the stock can start to re‑price within 3‑6 months if macro‑policy signals stabilize.
Investor Playbook: Bull vs Bear Cases for Dhampur Sugar
Bull Case: The earnings beat is real and sustainable. Continued sugar price support, higher ethanol demand from fuel mandates, and stable power tariffs push EBITDA margins above 9% within a year. A re‑rating to an EV/EBITDA multiple of 8‑9× lifts the fair value to ₹190‑₹210, delivering a 60‑80% upside from current levels.
Bear Case: Policy reversal on ethanol subsidies or a sudden drop in sugarcane procurement could erode top‑line growth. If margins regress to the sector median of 5‑6% and the stock remains stuck below ₹120, the fair value collapses to under ₹100, exposing investors to further downside.
Bottom line: DSM’s financials have finally caught up with its diversification strategy. The market’s lag in pricing the turnaround creates a compelling risk‑reward profile for investors who can tolerate short‑term volatility while the fundamentals settle.