Buy Supreme Industries; target of Rs 1350 : Sharekhan

Sharekhan's research report on Supreme Industries

Considering healthy demand prospects during FY2021-22E, the company intends to incur a capex of Rs 350 crores to expand capacities mainly in piping segment and packaging film segment. We believe that the company will be able to deliver revenue and earnings CAGR of 6.9% and 10.7% respectively during FY2020-22E, despite the company’s reluctance to provide annual guidance given the COVID-19 crisis. Though the COVID-19 led lockdown impacted Q1FY2020 results adversely with revenue, EBITDA and PAT witnessing a decline of 26.7%, 30.0% and 53.5% respectively performance remained above our expectation.

Outlook

We maintain our Buy rating on Supreme Industries Limited (SIL) with a revised PT of Rs. 1,350 assigning a higher multiple to factor in early cycle recovery.

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