Geojit Financial Services research report on Supreme Industries
Supreme Industries Ltd. (SIL) is India’s leading player in plastic products; the company’s wide range of offerings include plastic piping systems, packaging, industrial and consumer products. Revenue was flat YoY, primarily due muted volume growth of 2.3% YoY and a 3% YoY decline in realisations due to the volatility in PVC resin prices. The combination of reduced government infrastructure spending, a slowdown in the real estate sector, and persistent price fluctuations in PVC led to destocking, adversely impacting overall volumes and profitability. EBITDA margins contracted by 256 bps YoY to 13.8%, largely attributable to an increase in other operating expenses. As a result, the net profit declined by 17% YoY. We believe PVC prices have largely stabilized, with affordability improving significantly. A recovery is anticipated in FY26, supported by a healthy in demand from the agriculture sector, as well as a rebound in real estate and construction activities. We project a 12% CAGR in volume and 10% in revenue from FY25-27E. Profitability is expected to grow at a CAGR of 23% supported by better realisations.
Outlook
We value SIL at a P/E of 36x (5-yr avg.) based on FY27E EPS, with a target price of Rs. 4107. We reiterate “BUY” rating on the stock.
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