Global raw sugar prices skyrocketed in 2023 due to reduced market supply, driven by unfavourable climate conditions and irregular rainfall. However, the average global raw sugar price (YTD average: $21.29/lb) is now 10.8% lower than the mean of 2023. The decline in global sugar prices is mostly related to improved global supply prospects, aided by larger-than-previously-anticipated outputs in India and Thailand. In addition, the lagged impact of improved rainfall in Brazil in late March and early April, after a prolonged period of dry weather conditions, may have also eased some supply concerns.
In isolation, this moderation in raw sugar prices is expected to have a positive passthrough to DANGSUGAR’s raw material costs. However, we note the potential drags from domestic macroeconomic challenges such as FX volatility and high inflationary pressures. All considered, adjustments to our forecasts resulted in a new 12-month target price (TP) of N38.30 and a HOLD recommendation on the stock.
