Buy Supreme Industries Ltd For Target Rs.4,610 Prabhudas Liladhar Capital Ltd
PVC Stabilization to Drive Volume Recovery
Supreme Industries (SI) reported a 14.3% YoY decline in Q1FY27 volumes, with the plastic piping segment witnessing a 15.4% YoY decline, primarily due to a sharp correction in PVC resin prices that led to channel destocking at the distributor level. Despite the weak Q1 performance, management reiterated its FY27 guidance, expecting overall volume growth of 12–13% and 15–17% growth in the piping segment and maintaining its EBITDA margin guidance of 14–14.5%. Management expects PVC prices to stabilize following the implementation of MIP and the withdrawal of the customs duty exemption (effective 16 July), which should support channel restocking and demand recovery. Exports remain a key long-term growth driver, with the company targeting an increase in export revenue from USD 26mn to USD 150mn over the next 6–7 years. We estimate FY26-28E revenue/EBITDA/PAT CAGR of 15.8%/18.4%/23.9%, with volume CAGR of 11.4% and EBITDA margin expansion of ~60bps. We have upgrade our earnings estimates for FY27/FY28E by 4.5%/3.5% with a TP to INR 4,610 (earlier INR 4,454) based on 40x Mar’28E earnings. Maintain ‘BUY’
Q1FY27 financial performance:
Revenues grew by 4.2% YoY to INR 27.2bn (PLe: INR 30.1bn) overall volume decline by 14.3% YoY to 158kMT, while realisations increased 21.5% YoY, partly offsetting the impact of lower volumes. EBITDA grew by 24.8% YoY to INR 4.0bn (PLe: INR 4.4bn). EBITDA margins expanded by 240bps YoY to 14.6% (PLe: 14.7%). EBITDA per Kg grew by 45.6% YoY to INR 25/Kg. Consolidated PAT incl. income from associates grew by 38.8% YoY to INR 2.8bn (PLe: INR 2.7bn). The overall turnover of value-added products increased to INR 11.4bn in Q1FY27 as compared to INR 9.3bn in Q1FY26
Segmental Overview of Q1FY27:
Plastic Pipe segment reported a revenue of INR 17.9bn remained flat YoY, Packaging Product segment reported a revenue of INR 4.4bn up 9.1% YoY, Industrial Product segment reported a revenue of INR 3.7bn up 23.8% YoY, Consumer Product segment reported a revenue of INR 0.9bn down 11.2% YoY. Plastic pipe/packaging segment EBIT margins expanded by 270/100bps to 11.4%/12.5%, whereas Industrial EBIT margins remained flat YoY and Consumer segment EBIT got contracted by 270bps to 11.3%.
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SEBI Registration number is INH000000933
