Buy Supreme Industries; target of Rs 5188: Prabhudas Lilladher

Prabhudas Lilladher's research report on Supreme Industries

Supreme Industries (SI) delivered robust volume growth of 32.5% ahead of expectations, mainly led by Plastic pipe segment (up 41.4% YoY on higher base) while EBITDA/kg decrease to ~Rs 25/kg (down 22.9% YoY). SI has guided its overall volume growth of 20% & 25% for pipe segment in FY25. SI has increased its brownfield expansion plan at existing manufacturing sites and also to put up new plants near Patna (Bihar) and Vijayawada (AP). We continue to maintain our positive view on SI given 1) capacity expansion in different geographies, 2) new product expansion, 3) wide pan India distributors, and 4) cash surplus of Rs11.8bn for funding expansion plans. We estimate FY24-26E Revenue/EBITDA/PAT CAGR of 17.7%/21.9%/21.4%, with volume CAGR of 16.1% and EBITDA margin improvement of 110bps.

Outlook

We have upward revised our earnings estimates for FY25/FY26 by +3.9%/+1.9% and revised TP to Rs 5,188 (Rs 5,094 earlier), based on 40x FY26 EPS plus 25% discount to Supreme Petrochem’s stake.

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