Prabhudas Lilladher has reiterated an "Accumulate" rating on Supreme Industries (SI), with a revised target price (TP) of Rs 3,803, up from the earlier Rs 3,689. Despite short-term softness due to demand challenges and margin contraction in its flagship plastic pipes division, the research house believes SI’s strategic investments, volume-led recovery, and upcoming capacity expansions position it for sustainable growth. Earnings revisions upward for FY26E and FY27E reflect improving confidence. Investors are advised to consider accumulating at current levels around Rs 3,512 for meaningful upside.
Muted Q4FY25 Results Amid Demand Volatility
Supreme Industries posted a flat topline of Rs 30.3 billion in Q4FY25, marginally missing street expectations.
Volumes rose by 2.3% year-on-year (YoY) to 200,000 metric tonnes, but realizations declined by 1.8% YoY, impacted by lower pricing across product segments.
Key segment-wise performance:
Plastic pipes revenue dropped 3.6% YoY to Rs 20.7 billion.
Packaging products rose by 11.9% YoY to Rs 4.2 billion.
Industrial products witnessed a 1.5% YoY contraction.
Consumer products recorded a robust 15% YoY growth.
EBITDA margins came under pressure, contracting 260 basis points YoY to 13.8%, primarily due to inventory losses estimated at Rs 1.5 billion.
Adjusted PAT declined 17.2% YoY to Rs 2.9 billion, reflecting a challenging operating environment.
Outlook Brightens on Volume Recovery and Capacity Expansion
Looking ahead, Supreme Industries projects a strong comeback:
The topline is expected to reach Rs 120 billion by FY26, fueled by a 10–12% volume growth in the plastic pipes division.
Management has guided for a healthy 14.5–15.5% EBITDA margin range.
Key expansion initiatives:
Scaling plastic pipe manufacturing capacity to 1 million MT by FY26.
Setting up 5,000 MT capacity for PVC profile manufacturing.
Enhancing presence in international markets via strategic acquisition of Wavin’s Indian and SAARC operations, adding 73,000 MTPA across three new plants.
Such measures are likely to boost SI’s leadership in the organized plastic pipes market and diversify its portfolio across verticals.
Segmental Insights: Pipes Under Pressure, Consumer Products Thrive
The pipes division bore the brunt of the headwinds, with EBIT/kg dropping by 27.8% YoY to Rs 13.3 due to volatility in PVC resin prices and weak infrastructure demand.
However, other segments exhibited resilience:
Packaging EBIT margins contracted but volumes expanded, contributing Rs 8.5 billion in FY25, expected to cross Rs 10 billion in FY26.
Consumer products, notably bathroom fittings, doubled sales YoY, with plans to expand SKU count from 729 to 1,000.
International expansion, increased SKU offerings, and protective packaging innovations such as PP Silent pipes and Electrofusion Olefins should cushion against domestic market volatility.
Key Catalysts and Risks to Monitor
Positive Triggers:
Volume recovery post monsoon season, aided by infrastructure revival.
Successful Wavin acquisition integration, opening access to advanced piping technologies.
Robust capex pipeline of Rs 11 billion to support growth.
Risks:
Sustained weakness in PVC pricing affecting margins.
Delays in government infrastructure spending.
Regulatory disruptions impacting supply chains or input costs.
Stock Levels for Investors
Current Market Price (CMP): Rs 3,512
Target Price (TP): Rs 3,803
Upside Potential: Approximately 8%
Support levels are seen at Rs 3,450 and Rs 3,350, with resistance near Rs 3,800–3,850.
Fresh accumulation is advised on dips towards Rs 3,450 for a target of Rs 3,800 over the next 6–9 months.
Final Takeaway
Supreme Industries continues to demonstrate its ability to navigate volatility through prudent capacity expansions, product innovation, and strategic acquisitions.
While near-term pressures persist, its robust fundamentals, disciplined capital allocation, and market leadership warrant accumulation on declines for long-term investors.
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