Supreme Industries shares fell in early trade on July 23 after the firm 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.
At 9.30 am, the plastics firm's shares were quoting Rs 5,658 on the NSE, lower by 0.7 percent from the previous close.
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The firm's enhanced capacity addition along with strong demand from the
public and private sectors provides robust earnings growth visibility.
"However, the run-up in the stock price though forces our hand to downgrade Supreme Industries to ‘hold' despite ascribing
a 46x PE (up from 42x) on Q1FY27E given robust growth visibility," said Nuvama.
International brokerage Jefferies 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.
Jefferies had raised its target price to Rs 6,700 on July 10, raising the target from Rs 5,390. The upgrade came after volumes grew 22 percent on-year during April-May period despite a high base.
Analysts at Jefferies has said that Supreme Industries' is a good play on housing, capex, and agriculture and they estimate 25 percent earnings per share (EPS) compounded annual growth rate (CAGR) over FY24-27.
"Sales grew by 12 percent YoY impacted by PVC volatility. The focus is on value-added sales that can aid margin. SKU breadth and distribution depth act will act as key moats for share gains," the brokerage firm added.
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