Result Update: Supreme Industries Ltd - ACCUMULATE - TP Rs.1248 - Kotak

Supreme Industries Q2FY18 results were ahead of our estimates led by strong volume growth across most of the segments. The company reported 19.5% yoy growth in revenue backed by 18.3% yoy growth in total volume. The volume growth in the quarter was led by aggressive discount policy adopted by the company particularly in agri-based PVC pipes segment. The company's piping segment grew by 17% yoy despite 6% decline in the PVC pipes industry. Aggressive pricing and inventory loss resulted in 160 bps yoy decline in EBITDA margins which stood at 13.6% in Q2FY18. The company expects EBITDA margins to improve in H2FY18 and guided for 14-15% EBITDA margins in FY18. The company is positive on demand of plastic products across all segments led by improvement in consumption, long term benefits of GST, government focus on infra and affordable housing, etc and maintains volume guidance of 12% in FY18. We have factored in lower EBITDA margin guidance for FY18 in our estimates and expect sharp recovery in FY19E earnings factoring strong volume performance and positive growth outlook for the company. We upgrade our rating on the stock to ACCUMULATE (Vs Reduce) with the revised target price of Rs 1248 (Vs 1155 earlier), valuing the stock at 28x on FY19E earnings.

Shares of SUPREME INDUSTRIES LTD. was last trading in BSE at Rs.1123 as compared to the previous close of Rs. 1129.95. The total number of shares traded during the day was 2191 in over 213 trades.

The stock hit an intraday high of Rs. 1139.4 and intraday low of 1113. The net turnover during the day was Rs. 2464839.

Source : Equity Bulls

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