Buy Supreme Petrochem; target of Rs 425: KR Choksey

KR Choksey's research report on Supreme Petrochem

Total revenue for Q2FY18 came in at INR 7074.58 Mn as against our estimates of INR 7747.12 Mn which grew by 12.85% YoY and by 0.13% QoQ. EBIDTA for Q2FY18 stood at INR 614.79 Mn as against our estimates of INR 635.9 mn showing a variation of 3.4% growing by 24.77% YoY and 230.54% QoQ. While EBITDA margins stood at 8.7% up by 83 bps YoY and by 606 bps QoQ mainly due to inventory gains. PAT for Q2FY18 stood at INR 366.78 Mn and PAT margin was at 5.18% in line with our estimations of 5.19% witnessing an increase of 62 bps YoY and 373 bps QoQ.

Outlook

Going forward, we expect revenue/EBITDA/PAT to grow at 15.7%/20.67%/25.21% CAGR over FY17-FY19E. Further, we expect a change in product mix coupled with sustainability of healthy balance sheet and enhancement in return ratios. At CMP of INR 362 the stock is trading at P/E of 18x on FY18E and 13x on FY19E. We maintain our “BUY” rating on the stock with target price of INR 425 assigning a P/E of 15x on FY19E EPS of 28.4 resulting into an upside of 17.5%.