Result Update: Supreme Industries Ltd - ACCUMULATE - TP Rs.1324 - Kotak

Supreme Industries Q1FY19 results was broadly inline with estimates with volume grew by 8.4% largely on account of strong performance in packaging, industrial and consumer segments.

Key Highlights

- The company reported 15.8% yoy growth in revenue which was driven by 8.4% yoy growth in volume and 7.2% yoy growth in realization. The volume growth was better than our estimates due to strong growth in consumer, industrial and packaging segment.

- EBITDA margins at 13.8% was broadly inline with our estimates. The company expects EBITDA margins to be around ~15.5-16% in FY19E.

- The company is positive on industrial, consumer and packaging segment. The company is not positive on agri pipes due to lower demand and margins but maintains positive demand outlook on pipe from real estate sector. Based on this, the company has reduced volume growth guidance from 12-15% to 10-12% for FY19E.

Valuation & outlook

- We have maintained our FY19E & FY20E estimates. We expect earnings to grow at faster pace in FY19E and FY20E on company's ability to maintain strong margins.

- The stock is presently trading at PE of 33.6x and 26.4x on FY19E and FY20E EPS of Rs 35.9 and 45.6 per share, respectively.

- We upgrade our rating on the stock to Accumulate (Vs Reduce earlier) with unchanged target price of Rs 1324, valuing the stock at 29x on FY20E earnings.

Shares of SUPREME INDUSTRIES LTD. was last trading in BSE at Rs.1171 as compared to the previous close of Rs. 1170.5. The total number of shares traded during the day was 1843 in over 175 trades.

The stock hit an intraday high of Rs. 1201 and intraday low of 1170.1. The net turnover during the day was Rs. 2175027.

Source : Equity Bulls

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