In the pipe company space, international brokerage Jefferies bets on Supreme Industries as its pick over Astral Pipes.
Over the past ten quarters, Jefferies noted that Supreme Industries’ volume growth in the pipes segment has consistently outpaced Astral Pipes. Additionally, Supreme's two-year volume CAGR is at 33 percent, as compared to Astral Pipes' 24 percent during the same timer period.
As a result, Jefferies reiterated its 'buy' call on Supreme Industries, with a target of Rs 6,520 per share. In comparison, the brokerage kept its 'hold' rating intact for Astral Pipes, seeing a fair value at Rs 2,115 apiece.
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Supreme Industries also boasts of a pipe SKU count at 14,000, double that of Astral's 7,000 SKUs. In the past, Astral Pipes has launches new categories to drive growth, while Jefferies noted that Supreme Industries' growth has been organic during the same time.
Over FY24-27, Jefferies estimated Astral Pipes' EPS CAGR at 26-27 percent, which is broadly similar to Supreme at 24-25 percent. However, Astral's FY26 PE at 58x is much higher than Supreme at 39x.
Over the past six months, Supreme Industries shares have rallied by about 26 percent, as compared to Astral Pipes' stock price, which has fallen by seven percent.
Supreme Industries posted a net profit of Rs 273.37 crore for the June 2024 quarter, coming under estimates. The net profit marked a 26.83 percent rise from Rs 215.54 crore in the same quarter last year. During the quarter, the company saw a 11.3 percent increase in revenue from operations, clocking in at Rs 2,636.35 crore compared to Rs 2,368.58 crore in the same period last year.
Following the Q1 results, Jefferies had slashed its target price to Rs 6,520 from Rs 6,700 apiece, saying despite the high base, Supreme Industries managed to see strong volume growth. The prices of raw materials are expected to stay affordable, with the margins remaining resilient.
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