Geojit Financial
Supreme Industries (Hold)
CMP: ₹1,354
Target: ₹1,476
Supreme Industries Ltd (SIL) is India’s leading player in plastic products; the wide range of offering includes plastic piping system, packaging, industrial and consumer products.
We upgrade to ‘Hold’, given improvement in margin profile driven by better product mix and lower cost and expected revival in revenue growth.
Q3FY20 Revenue de-grew by 3 per cent y-o-y, but PAT grew by 52 per cent y-o-y on account of higher operating margin and corporate tax cut.
EBITDA margin improved by 360bps y-o-y to 16.1 per cent led lower cost and improved product mix.
Third quarter volume growth was flat y-o-y, but management expects volume to pick-up led by revival in demand from packaging and plastic piping segment.
We expect profitability to grow by 17 per cent CAGR over FY20E-22E.
We value SIL at P/E of 28x (Last five year average) as we roll forward to FY22E with a target price of ₹1,476.
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