IGI Logo

We attended the AGM of Supreme Industries Ltd. & following are the key highlights from the same:

* Management reiterated their growth guidance of 15% for FY24. Plastic pipe volumes to grow by 20%+ in FY24. Overall, company expects a turnover of Rs110Bn with an operating margin of 13.5-14%

* Management is confident on achieving this growth on the back of strong demand from Jal Jeevan mission, large spends on infrastructure, new product launches and increase in distribution network.

* Company’s new products accords categories are gaining positive response from the market

* In valves which is a Rs150Bn industry, 3% share is likely to shift to plastic valves.

* For industrial pipes also, company believes there will be a major shift in demand from metal to plastic pipes. World leading company of industrial plastic pipes recorded sales volume of 100,000Te in FY23

* Company has planned capex of Rs7.5Bn for FY24 (including carry forward capex of Rs1.49Bn). which will increase the production capacity to 9,55,000MTPA by end of FY24. Entire capex shall be funded from internal accruals.

* Capacity for plastic piping system would increase from 6,00,000MTPA to 7,50,000MTPA by the end of FY24.

* Company has net cash surplus of Rs8.33Bn as on May, 23 that would be used to fund its capex and working capital requirement

* The company is expanding its presence in tehsil/taluka/mandal level by increasing its channel partners, retailers & influencers. Company’s active channel partners have increased to 4,577 in FY23 from 4,053 in FY22.

* RM prices continue their downward journey, wherein PVC resins witnessed a fall of Rs14/kg from second week of March,23, while Polypropylene and Polyethylene have corrected by Rs17/kg and Rs10/kg respectively. The company anticipates that with reduced logistic cost and abundant supply globally, polymer price will remain in lower price range.

* Net revenue for 2mFY24 has increased by 9.5%YoY to Rs15.27Bn. Company has achieved overall volume growth of 41.3% to 96,198MT during the said period.

* Turnover of value-added products stood at Rs33.29Bn (37%) in FY23 as compared to Rs29.11Bn (36%) in FY22. While Turnover for 2mFY24 was Rs4.5Bn, which was flattish YoY.

* Exports grew marginally from $29.11Mn in FY22 to $29.27Mn in FY23. Company achieved Export turnover of $4.37Mn for 2mFY24 stood as against $5.68Mn in the corresponding period of previous year.

Our view:

* We reckon demand for plastic pipes to remain buoyant on account of strong demand from Jal Jeevan Mission coupled with healthy demand from irrigation. Moreover, with resilient growth in new project launches, pluming demand for plastic should also witness strong traction. SI being the largest plastic pipes manufacturer, should benefit from the same. Moreover, with new upcoming capacities, product launches and shift in demand to branded players, we recon SI to outperform industry growth by reporting volume growth of 16%CAGR over FY23-25E. Overall, we expect Revenue/EBITDA/PAT to grow by 12%/22%/12% over FY23-25E. Given the buoyancy in demand, which is evident via our channel checks & management’s commentary, we have revised our FY24E/FY25E estimates upwards. ? However, at CMP, stock trades at P/E(x) of 43x/36x on FY24E/FY25E EPS of Rs72/86 (standalone) respectively. Hence, even post revising our FY25E EPS estimate upwards by 7%, we have maintained our NEUTRAL rating on the stock.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer