Buy Supreme Industries; target of Rs 4054: Sharekhan

Sharekhan's research report on Supreme Industries

Q4FY25 revenues were flat year-on-year, as expected, due to lower volumes and a decline in realizations caused by PVC price volatility. However, the EBITDA margin exceeded our forecast by 150 bps. Supreme has signed an MOU to acquire Orbia Wavin’s piping and fitting division, which has an annual capacity of 73,000 MT. This acquisition will provide access to Wavin’s piping technologies in India and SAARC countries. The company plans to increase its total piping system capacity to 1 million MT by FY26, up from the current 872,000 MT, which includes Wavin’s capacity. The company targets Rs. 12,000 crore in revenue with an EBITDA margin of 14.5-15.4%, aiming to grow 10-12% in volumes, while the industry is expected to grow at 6-8% in FY26. It plans a Rs. 1,100 crore capex for expansion, including the acquisition of a building and infrastructure business, and new manufacturing facilities, funded through internal accruals.

Outlook

We retain a Buy on Supreme Industries Limited (SIL) with a revised PT of Rs. 4,054, lowering our target price because of the reduction in estimated earnings.