Buy Supreme Petrochemicals; target of Rs 1021: KR Choksey

KR Choksey's research report on Supreme Petrochemicals

Supreme Petrochem’s (SPL) revenues saw robust growth of 41.8% YoY to INR 14,854 mn. Though on QoQ basis revenue was mostly flat, declining by 0.8%. The strong growth in revenue was on account of healthy demand and improved realisations. EBITDA witnessed a healthy growth of 27.5% YoY to INR 2,517 mn, though sequentially EBITDA declined by 18.2% QoQ. EBITDA margin contracted by 190 bps YoY/361 bps QoQ to 16.9%. PAT for the quarter stood at INR 1,891 mn, witnessing a strong growth of 29.3% YoY. Though on QoQ basis, PAT was down by 16.1%. PAT margin contracted by 123 bps YoY/232 bps QoQ to 12.7%.

Outlook

We continue to remain positive on the growth prospects of SPL. The stock is currently trading at a P/E multiple of 9.9x/8.6x on its FY23E/24E EPS of INR 88.7/102.1 respectively. We value the stock at 10x on its FY24E EPS of INR 102.1/share, which yields a target price of INR 1,021/share, an upside of 16.1% over the CMP. Accordingly, we recommend a “BUY” rating on the shares of Supreme Petrochem Ltd.