Result Update: Supreme Industries Ltd - BUY - TP Rs.1205 - Kotak

Supreme Industries Q2FY19 results was mixed bag. Results after adjusted for one off was ahead of estimates at topline, but was below our estimates in terms of margins.

Key Highlights

- The company reported 24.7% yoy growth in revenue which was driven by Rs Rs 808.5 mn contribution from sale of commercial real estate. Adjusted for the same, the revenue for the quarter grew by 17.1% yoy (Vs 15.9% yoy growth estimates). The adjusted revenue growth was driven by 5.2% growth in volume and 11.7% yoy growth in realization. The volume growth was below our estimates due to company's focus on high value products, low volume in cross laminated films and plant shutdown in packaging segment for maintenance.

- In core business, the EBITDA margin was at 13.3% and was below our estimates of 14.2% due to impact of rupee depreciation on imported raw materials, higher raw material prices due to rise in crude prices and lag effect in pass on of input cost. The company has reduced EBITDA margins guidance for FY19E by 100 bps to 14.5-15%.

Valuation & outlook

- The company is positive on demand of its products and expects value driven growth in the coming years. We have marginally reduced FY19E & FY20E estimates based on lower volume assumptions.

- The stock is presently trading at PE of 28.3x and 22.9x on FY19E and FY20E revised EPS of Rs 34.9 and 43 per share, respectively. We upgrade our rating on the stock to BUY (Vs Accumulate earlier) with revised target price of Rs 1205 (vs Rs 1324), valuing the stock at 28x (Vs 29x) on FY20E earnings.

Shares of SUPREME INDUSTRIES LTD. was last trading in BSE at Rs.990 as compared to the previous close of Rs. 986.75. The total number of shares traded during the day was 4142 in over 497 trades.

The stock hit an intraday high of Rs. 1024.85 and intraday low of 987.65. The net turnover during the day was Rs. 4147889.

Source : Equity Bulls

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