Praveen Sahay , Research Analyst , PL Capital – Prabhudas Lilladher
Volume guidance revised downward:
We have downward revised our earnings estimates for FY25/FY26/FY27E by 12.2%/8.0%/6.5% and revised TP to Rs5,040 (Rs5,721 earlier), based on 42x FY27E earnings. Supreme Industries’ (SI) Q3FY25 volume growth was 3.0% below with our estimates, due to lower volume in the plastic pipe segment (up 3.7% YoY against our est. of 8%) because of low demand in agri and infra segments, with extended rainfall in south India, and delay in ADD on PVC resin resulted de-stocking in the channels. EBITDA margin contracted by 320bps YoY with decrease in EBIT/kg to Rs10.9 (down 37.6% YoY) in pipe segment mainly due to inventory losses in pipe segment. SI has revised its guidance for overall volume growth to ~12% with EBITDA margin of 13.5-14% for FY25, and volume growth for pipe segment to 15-16%. SI has planned brownfield expansion at existing manufacturing sites and establishing new plants near Patna (Bihar), Malanpur (MP) and Kathua (J&K).
We estimate FY24-27E revenue/EBITDA/PAT CAGR of 12.8%/12.1%/12.4%, with volume CAGR of 12.7% and EBITDA margin contraction of ~30bps. Maintain ‘BUY’.
Revenues increase by 2.5%, Adj. PAT decline by 27.0%: Sales increase by 2.5% YoY to Rs25.1bn (PLe:Rs26.0bn) with vol. increases by 3.0% YoY to 163kMT and realization decline by 0.5% YoY. Plastic Pipe segment revenue up by 1.3% YoY to Rs16.6bn, packaging revenue up by 12.5% YoY to Rs4.0bn, industrial revenue remain flat at Rs3.3bn, consumer segment was down by 5.3% YoY to Rs1.1bn. EBITDA decline by 18.5% YoY to Rs3.1bn (PLe: Rs3.6bn). EBITDA margin was at 12.3% (PLe:14.0%) and EBITDA per Kg reached to Rs13.0/kg. In Packaging/ Plastic Pipes/Consumer/industrial, EBIT margins contracted by ~210/470/150/75bps YoY to 11.1%/8.3%/15.9%/8.2%.PAT stood to Rs 1.9bn (-27.0%YoY; PLe Rs2.4bn).). The overall turnover of value added products remains at Rs.9.61bn in Q3FY25 as compared to Rs8.53bn in Q3FY24.
Con call highlights: 1) SI revised the guidance of 16-18% volume growth in plastic pipe system to 15-16% for FY25 mainly due to low spending on infrastructure by governments and extended winter rainfall in south India and some eastern states. 2) Company is expected to grow at 12% with a margin of 13.5-14.0% for FY25. 3) In Piping segment capacity is expected to reach at 900,000 MTPA by FY25 currently it is 820,000MTPA. Additionally, SI is planning three greenfield expansions in Jammu, Bihar, and Madhya Pradesh. 4) Plastic Piping industry across polymers grew by 1% in value terms whereas SI grew by 7.5% and CPVC industry has grew by 9% in volume terms whereas SI has grown more than 20% in 9MFY25. 5) In the beginning of FY25 SI has 421 SKUs in bath fittings and sanitaryware segment which increased to more 629 SKUs, with plans for further expansion.6) The company will launch ready-made windows with a 5,000-tonne capacity at its Kanpur plant, targeting UP, Uttarakhand, and NCR by the first half of FY25-26.7) Cross Laminated Film segment volume is expected to grew by 20%. 8) The Protective Packaging Division is expanding its capacity with a new greenfield site near a western port to support both export and domestic demand. The project is expected to conclude by Q1 FY26. 9) In furniture segment company introduced 12 new models in 9MFY25.10) The company received an LOI for 10 kg LPG cylinders from IOCL, with supplies expected to be completed by Feb25. Additionally, the company is working on developing a standard 14.2 kg cylinder design for all major oil marketing companies (IOCL, BPCL, and HPCL), which is expected to generate significant business opportunities in FY26 and commercialization of CNG cylinders is set to drive growth from Q4FY25. 11) The company has three OPVC lines with a capacity of 9,000 MTPA, focusing on smaller diameter pipes within the range of 100-400mm. Additionally, seven new lines are planned, with a total capacity of 30,000 MTPA by FY28. 12) Company reported an inventory loss of Rs 1000mn in 9MFY25.