Reduce Supreme Industries Ltd For Target Rs. 3,600 By Elara Capital
Another quarter, another let-down
Supreme Industries (SI IN) reported significantly lower-than-expected volume growth in its plastic piping segment, missing its 15-16% target for FY25 amid continued weak demand environment. Demand recovery is imperative to meet FY26 management guidance of lowteen volume growth. Although achieving this appears challenging, stable PVC prices may aid channel restocking and support better performance. However, given the subdued nearterm growth outlook, we reiterate Reduce and pare our TP to INR 3,600 (from INR 3,800), maintaining a 35x P/E on FY27E EPS.
Volatility in PVC prices hit Q4 and FY25 performance: SI reported Q4 net sales of INR 30.2bn, up 0.6% YoY but 1% below estimates. The plastic piping segment saw a 3.6% value decline due to lower realizations, despite a 2.2% volume growth— lagging the expectation of 5%. For FY25, volumes in this segment rose 6%, hit by volatility in PVC price and subsequent de-stocking, along with muted infrastructure demand. Nevertheless, SI outperformed the overall plastic pipes industry, which saw a 6% volume drop. While infrastructure remained weak, demand from agriculture and housing showed resilience. The CPVC segment stood out with a strong 20% YoY growth. Performance across other segments was mixed in Q4 —Industrial declined 1.5%, Packaging grew 13.2% driven by cross-laminated film products, and Consumer Products rose 15%.
Pipes – SI confident of achieving low-teen volume growth in FY26: SI initially projected a 15-16% volume growth in its plastic piping segment for FY25 but delivered a muted 6%, falling short of expectations. However, with PVC prices now believed to have bottomed out and April 2025 prices down 12% YoY, affordability has improved significantly. This with robust retail demand and a revival in infrastructure spending is expected to drive volumes, going forward. The management is confident of outpacing industry growth by 3-4% in FY26, targeting a 12- 13% volume increase. Further supporting this outlook is SI’s recent acquisition of Wavin Pipes business from Orbia Corporation, which adds 73,000MT to its capacity and will help scale its total pipe capacity from 0.87mn MT to 1mn MT in FY26.
FY26 margin guidance at 14.5-15.5%: Q4 EBITDA margin declined 260bps YoY to 13.8%, lower than 14.8% estimated due to negative operating leverage, lower sales realization and inventory loss. The management expects FY26 EBITDA margin at 14.5-15.5%, higher than 13.7% in FY25 led by robust volumes and better realizations.
Reiterate Reduce with TP pared to INR 3,600: We cut FY26E/27E earnings estimates by 5% each due to lower-than-expected revenue growth. We reiterate Reduce and also lower our TP to INR 3,600 (from INR 3,800) based on 35x (unchanged) FY27E EPS due to uncertain demand environment and lower PVC prices. Key upside risk to our recommendation is a sharp increase in PVC prices.
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SEBI Registration number is INH000000933
