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Khon Kaen Sugar Industry's profit is expected to rise later in the year in anticipation it would be used for making ethanol following the overnment's announcement to promote E85 gasohol as a fuel.

The stock was given a "buy" rating by Tisco Securities, which expects an improvement in local ethanol demand as the government plans to introduce E85 by year-end, three years ahead of schedule.

Some securities houses gave a "sell" rating for KSL as the company recently said its earnings was expected to fall.

KSL last week announced its second-quarter net profit should be Bt375 million, down 1.9 per cent on year, but up 16 per cent from the last quarter.

Tisco Securities' latest research said global demand for ethanol should to rise following the surge in crude oil prices. This in turn could reduce sugar oversupply and boost prices for sugar and ethanol.

In addition, its earnings this year should also be protected as it has locked in selling prices of sugar for the rest of the year despite recent weakness in global sugar prices, it said.

KSL booked sales revenue of Bt2.97 billion, up 12.3 per cent on year and up 30.9 per cent on quarter.

The broker maintains its 2008-2010 net profit forecasts of Bt979 million, Bt1.3 billion, and Bt1.78 billion, respectively.

Part of Tisco's recommendation was made on the assumption that the company's ethanol and electricity generating businesses could boost income.

However, key risk factors include fluctuations in the sugarcane crop, sugar and ethanol prices and foreign exchange rates as well as delays to new projects.

Ethanol is used for material of gasohol production.

Asia Plus securities said in its research that KSL's domestic sales, which did not receive benefits from an increase in sugar prices, would be in the short-term.

KSL's ethanol business should be favourable if sugar is used to make alternative fuels here.

Ethanol prices have climbed to Bt16 per litre, surging 23 per cent from the lowest point at the end of last year.

Asia Plus has revised down its 2008-2009 earnings forecast for KSL to Bt965 million and Bt1.16 billion respectively.

The broker maintains a buy for KSL, seeing an up-side gain in its price partially from expected gains from ethanol.

Meanwhile, Globlex Securities has revised down its forecasts for KSL's earning in 2008 and 2009 by 12.9 per cent and 27.1 per cent respectively.

The broker also gave it a "sell" rating as it would not gain from higher retail prices for sugar.

Globlex said KSL's projects in Laos and Cambodia were not performing as well as expected.