Buy Supreme Industries; target of Rs 5350: Motilal Oswal

Motilal Oswal's research report on Supreme Industries

Supreme Industries (SI) reported a muted quarter amid the ongoing challenges of volatile pricing and the early onset of monsoon, affecting demand. The company reported flat revenue YoY with volume growth of only 6% YoY to 184k MT. EBITDA margin contracted 250bp YoY to 12.2%, mainly affected by inventory losses. However, management guided strong volume growth in the plastic piping system for FY26 (15-17%) despite muted growth in 1Q. This was led by a positive demand outlook amid stabilizing prices at affordable levels and the likely addition of Wavin capacity (~75,000MTPA) in 2QFY26. The overall EBITDA margin was guided to be ~14.5-15.5% in FY26, supported by the absence of inventory losses, a higher share of VAP, and an expected improvement in capacity utilization.

Outlook

We expect SI to clock 13%/22%/24% CAGR in revenue/EBITDA/PAT over FY25-28E. We value the stock at 45x FY27 EPS to arrive at a TP of INR5,350. Reiterate BUY.