Reduce Supreme Industries; target of Rs 3845: ICICI Securities

ICICI Securities recommended reduce rating on Supreme Industries with a target price of Rs 3845 in its research report dated October 30, 2023.

Broker Research

November 03, 2023 / 14:54 IST

Reduce

26 Aug, 2025 12:21

Volume

Todays L/H

ICICI Securities research report on Supreme Industries

In Q2FY24, Supreme Industries (SI) reported blended plastics volume growth of 23.2% YoY (4-year CAGR of 10.2%) on a low base, driven by 29.9% YoY volume growth in the pipes segment (4-year CAGR of 11%). Blended EBIT/kg grew 157% YoY to INR21.1 (+22.5% QoQ) with pipes EBIT/kg increasing 517% YoY to INR 19.5 (+17.7% QoQ) due to a low base (continuous decline of PVC price in Q2FY23 led to high inventory losses). Management remains optimistic of strong near-term demand and has revised its guidance for blended plastic volume growth to 23% YoY (20% earlier) and pipes volume growth to 28% YoY (23%–25% earlier) for FY24. It also guides for ~14.5% consolidated EBITDA margin (vs. >14% earlier) for FY24.

Outlook

We tweak FY24-26E PAT by ~2%–4% and roll-over our SoTP-based Dec’24E TP to INR 3,845 (from INR 3,290). We raise our core business target P/E to 35x (earlier 33x; ~30% premium to 5-year average 1-year forward P/E) based on high near-term growth prospects, but downgrade to REDUCE (from Hold) due to rich valuation.

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