CD Equisearch has given Buy recommendation for The Supreme Industries recommended buy rating on the stock with a target price of Rs 2468 in its research with a target price of Rs. 2468 in its research report issued on Mar 15, 2022

CD Equisearch’s research report on The Supreme Industries

Several factors pressured volumes of Supreme’s plastic piping products business last quarter as its of take plunged by 25.5%, resulting in overall volume de-growth of 18% in plastic goods. Distributors rushed to destock their stocks in a big way post October after PVC prices started to drop sharply. Discounts were also offered to dealers in January and December to liquidate stocks. Demand for PVC pipes was also affected by extended rainfall and supply chain disruptions in CPVC pipe system. Thanks to Covid -19 restrictions affecting reopening of hotels and other outdoor events, Supreme’s consumer products too bore the brunt of consumer shunning for its volumes declined by an unpleasing 18.5% last quarter. Precipitated by lower sales of cross laminated films – which also saw margin erosion during the quarter owing to higher raw material prices, Supreme’s revenue of value added products declined by about 12% to Rs 665 crs when compared with Rs 758 crs in the same quarter a year ago. Despite 50% growth in volumes in performance packaging film in Q3, EBIT of Supreme’s packaging products business fell by over 38% not least due to lower of take of protective packaging films (volumes declined by some 10%) and cross laminated films. Backed by robust growth in material handling division, industrial products business managed to buck the trend to post 6.1% rise in volumes.

Outlook

The current stock valuation implies perpetual growth rate of nearly 6.5% on next fiscal’s free cash flows. Balancing odds, we assign buy rating on the stock with revised target of Rs 2468 (previous target: Rs 2644) based on 30x FY23e earnings over a period of 6 months.

More Info

At 13:17 hrs Supreme Industries was quoting at Rs 1,963.60, down Rs 2.85, or 0.14 percent.

It has touched an intraday high of Rs 1,976.95 and an intraday low of Rs 1,955.20.

It was trading with volumes of 1,389 shares, compared to its thirty day average of 17,330 shares, a decrease of -91.98 percent.

In the previous trading session, the share closed down 1.38 percent or Rs 27.60 at Rs 1,966.45.

The share touched its 52-week high Rs 2,689.00 and 52-week low Rs 1,855.80 on 19 October, 2021 and 15 February, 2022, respectively.

Currently, it is trading 26.98 percent below its 52-week high and 5.81 percent above its 52-week low.

Market capitalisation stands at Rs 24,943.00 crore.

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