Buy Supreme Petrochemicals; target of Rs 427: KR Choksey

KR Choksey's research report on Supreme Petrochemicals

Supreme Petrochem’s (SPL) revenues saw decline in revenue by 8.9% YoY to INR 11,804mn and on a QoQ basis revenue fell by 4.4%. The muted growth in revenue was on account of lower volume offtake as well as subdued realisations. EBITDA witnessed a drastic fall of 47.0%YoY; while improved by 51.1% QoQ to INR 1189mn. EBITDA margin contracted by 723 bps YoY, whereas it improved by 370 bps QoQ to 10.1%. The fall in margin was due to a rise in raw material costs and other expenses on a YoY basis, however, raw material prices stabilised during the quarter along with a reduction in freight costs. PAT stood at INR 896mn, declining by 45.6% YoY and increasing by 50.2% QoQ. PAT margin contracted by 511 bps YoY and improved by 276 bps QoQ to 7.6%. The Board has also approved a 1:2 split of its existing equity shares.

Outlook

We continue to value the stock at 10x on its FY24E EPS of INR 42.7, which yields a target price of INR 427/share, an upside of 15.4% over the CMP. Accordingly, we maintain our “BUY” rating on the shares of Supreme Petrochem Ltd.

For all recommendations report, click here