Accumulate Supreme Industries; target of Rs 3583: Prabhudas Lilladher

Moneycontrol • 5 days ago

Original source

Key Investment Pillars

  • Supreme Industries revised its FY27 volume growth guidance downward to ~10% due to slower demand, with plastic piping growth expected at 13%.
  • The company maintained its EBITDA margin guidance at 14-14.5%, despite Q2FY27 margins being impacted by a lag in passing on PVC and CPVC prices and sharp increases in polyethylene prices.
  • CPVC volumes grew 30.5% YoY in H1 FY27, with further price hikes announced to offset higher raw material costs.
  • The company is maintaining adequate raw material inventories to mitigate import and shipping uncertainties, with FY27 capex cash outflow expected at INR 7-7.5bn.

Thesis Validation Checklist

  • Investors should watch for Supreme Industries' ability to achieve its revised volume growth guidance and maintain its EBITDA margin, despite margin pressure.
  • The company's ability to pass on price increases and manage raw material costs will be crucial in maintaining profitability.
  • Investors should also monitor the demand outlook for the plastic piping division and the company's progress in expanding its product offerings, such as OPVC windows and doors.
  • The company's efforts to mitigate shipping uncertainties and ensure uninterrupted customer supplies will also be important to track.