Supreme Industries - Q2FY13 result Update - Wallfort

Supreme Industries Ltd. (SIL) has posted Q2FY13 revenue below our expectation but marginally above our operating profit and net profit expectations. The company has reported top-line growth of 13% y-o-y to Rs.8,150mn (our estimate of Rs.8,420mn) in Q2FY13 against Rs.7,213mn in Q2FY12 on account of muted volume growth of 2.93%.

Revenue and Margin guidance

Management maintain 16% volume growth and 25% value growth in Sales for FY13 and expects EBIDTA margin at 14-15%.

EBIDTA Margin improved by 250bps y-o-y

During Q2FY13, EBIDTA increased by 36.25% y-o-y to Rs.1,194mn (our estimates of Rs.1,137mn) against Rs.876mn in Q2FY12 and corresponding margin improved by 250bps y-o-y on account of strong margin in Piping system and increase in share of Value Added Products to 34.6%. Net profit has decresed by 5.17% to Rs.583mn in Q2FY13 and correspondingly margin decreased by 137bps due to absence of profit from sale of real estate projects which was Rs. 327 mn in Q2FY12.

Valuation

We have valued SIL on SOTP basis. We have valued SIL's core business at 15x FY14 earning estimates which gives a value of Rs.370 per share. We have valued SIL's 29.88% stake in Supreme Petrochem based on its current MCap of Rs.5,810mn, applying a holding company discount of 30% to arrive at a value of Rs.9 per share for SIL.

Hence, we maintain a 'BUY' rating on SIL with a target price of Rs.379 (based on SOTP Valuation), an upside of 20%.

Source : Equity Bulls

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