Hold Supreme Industries; target of Rs 1457: CD Equisearch

CD Equisearch's research report on Supreme Industries

According to report by Market Research Future, the global PVC pipes industry is estimated to grow at a CAGR of 7.1% between 2016 and 2023 driven largely by increasing use of such pipes in water supply, sewage & drainage, housing & commercial and irrigation. In terms of production capacity, the report contends, CPVC pipes are expected to register the fastest growth over the next few years, all thanks to rising acceptance of CPVC pipes over galvanized or PVC pipes. The industry growth would also be propelled by increasing distribution network of manufacturers and greater government's focus on building irrigation and real estate infrastructure.

Outlook

The current valuation leaves little scope of appreciation, if any (the current valuation implies a perpetual growth of 8.5% on FY20 free cash flows). So we assign a "hold" rating on the stock with revise target of Rs 1457 (previous target: Rs 1615) based on 36x FY22e earnings.

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