Prabhudas Lilladher's research report on Supreme Industries
Supreme Industries (SI) reported volume growth of 17.0% in Q1FY15, in line with our estimates, mainly led by the plastic pipe segment (up 19.5% YoY), while EBITDA/kg increased 2.9% YoY to ~Rs22/kg. Plastic pipe realization corrected by 4.4% YoY and 2.2% QoQ even after the increase in PVC resin prices by 15% in Q1FY15 due to change in product mix and competitive pricing. SI has maintained its guidance of overall volume growth of +20% and +25% for the pipe segment with EBITDA margin of 15.0%-15.5% for FY25. SI has planned brownfield expansion at existing manufacturing sites and setting up new plants near Patna (Bihar) and Vijayawada (AP). We continue to maintain our positive view on SI given the 1) capacity expansion in different geographies, 2) new product expansion, 3) pan-India network of distributors, and 4) cash surplus of Rs12.4bn for funding expansion plans.
Outlook
We estimate FY24-26E revenue/EBITDA/PAT CAGR of 18.0%/20.9%/20.0%, with volume CAGR of 16.1% and EBITDA margin improvement of 80bps. We have downward revised our earnings estimates for FY25/FY26 by 2.1%/2.3% and revised TP to Rs6,069 (Rs6,211 earlier), based on 50x FY26E earnings.
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