Dolat Capital recommended reduce rating on Supreme Industries with a target price of Rs 1227 in its research report dated July 27, 2020.
Dolat Capital's research report on Supreme Industries
Results above estimates on revenue front as demand for piping products from rural segment grew 15%. Gross margins contracted by 180 bps. Share of value added products declined 17% YoY. SI reported volume de-growth of 12% in piping segment in Q1FY21, rural piping demand supported growth as housing segment was a complete washout. Overall volume de-growth registered for Q1FY21 was 19.4% which was impacted due to negative performance from all the segments. Consumer products segment de-grew 71% followed by industrial products segment which de-grew 54%. Management has not guided any volume growth or margin guidance for FY21 as they believe they will have to wait till H2FY21 for the situation to get better and demand to pick up.
We do not expect signs of recovery in this industry till H2FY21, as housing activities have not started and high margin CPVC segment has not picked up. Usually Q2FY21 is a lean quarter for the Company. We maintain our Reduce rating on the with a target price of Rs 1,227 to trade at 32x FY22E earnings.
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