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Q3FY21 Result Update - Supreme Industries - ICICI Direct

Posted On: 2021-01-27 09:00:00 (Time Zone: Arizona, USA)

Supreme' strong performance continued in Q3FY21 also, with reported headline numbers much ahead of our estimates. The key highlights of the result were: 1) strong demand for piping products from housing segment supported by revival in real estate demand, 2) market share gains across all product categories (9MFY21 company's PVC resin sales volume recovery was much ahead at 96% vs. 79% recovery of industry), 3) robust demand for industrial & consumer product categories with improved product mix, 4) strong growth in value added product categories (up 33% YoY) in Q3FY21, 5) inventory gains of Rs. 80 crore and saving in other costs that drove EBITDA margin (adjusted EBITDA margin ~17% vs. 21.8 in Q3), 6) according to management, PVC price may normalise from March 2021 onwards, 7) continues with capex plan of ~ Rs. 400 crore to expand capacity in Odisha, Assam and Tamil Nadu in the next two years, 8) the management expects overall 11% volume CAGR, going forward. We build-in topline growth for FY20-23E in line with management expectation (largely driven by volume growth) along with normalised EBITDA margin, going forward.

Valuation & Outlook

We believe government schemes like Housing for all, Jal Jeevan Mission would be key growth drivers for plastic piping industry, going forward. Also, market share gains supported by its robust supply chain network would continue help drive volume growth in FY20-23E. We roll over our valuation on FY23E and value the company at 35x FY23E earnings. We reiterate BUY rating on the stock with a revised target price of Rs. 2010 (earlier TP of Rs. 1695).

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Shares of SUPREME INDUSTRIES LTD. was last trading in BSE at Rs.1789.1 as compared to the previous close of Rs. 1731.65. The total number of shares traded during the day was 5427 in over 843 trades.

The stock hit an intraday high of Rs. 1792.85 and intraday low of 1732. The net turnover during the day was Rs. 9557231.

Source: Equity Bulls

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