Broker’s Call: Supreme Industries (Sell)

| Updated on July 30, 2020 Published on July 30, 2020

Geojit Financial

Supreme Industries (Sell)

Target: ₹1,073

CMP: ₹1,262.20

Supreme Industries Ltd (SIL) is India’s leading player in plastic products; its wide range of offering includes plastic piping system, packaging, industrial and consumer products. We downgrade SIL to Sell as we expect the slowdown to persist for some more time and the current premium valuation does not provide comfort.

Q1FY21 revenue and PAT de-grew by 27 per cent and 53 per cent y-o-y, respectively, impacted by the lockdown. EBITDA margin declined by 50 bps y-o-y to 11.1 per cent on account of sub-optimal revenue growth and weak operating performance.

Q1 volume de-grew by 19 per cent y-o-y, but we expect revival in revenue growth from H2FY21, led by revival in rural and agri demand and gradual pick-up in business as Covid-19-related issues moderate.

Though we are positive on long-term growth outlook of SIL, the current premium valuation is not sustainable.

We value SIL at PE of 27x on FY22 with a target price of ₹1,073.

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Published on July 30, 2020
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