Its 2023 core earnings will be led by the same drivers as in 2022 including increased cane and sugar volumes, sustained high sugar price and fatter GM from cheaper-priced bagasse costs. The intensified La Niña will boost Thai and Indian sugar production which has already been factored in, but will reduce Brazilian output due to the anticipated drought which the market has yet to factor in. Our TRADING BUY stands, based on its 2022 profit jump and cheap valuation (11.2x vs its long-term mean of 16.7x).
Small 2022/23 global sugar surplus estimate—no material impact
S&P Global Platts Analytics, the soft commodities research house, revised down its 2022/23 global sugar surplus estimate by 2m tonnes (from 3.87m to 1.87m tonnes), which is higher than its 2021/22 surplus estimate of 0.35m tonnes. It also released its 2023/24 forecast for the first time of a 2.69m-tonne global sugar surplus, or up by 0.82m tonnes YoY. We regard the surplus of 2-3m tonnes in 2022/23 or in 2023/24 as marginal and should not have any material impact on the global sugar price. The surplus in 2022/23 is underpinned by higher production in Thailand (up 3.2m YoY to 12.45m tonnes), and India (up 3m to 36m tonnes) and in center-south Brazil (up 2m to 34.03m tonnes).