Supreme Industries Q2 Results Review - Strong Volume Growth In FY24 To Likely Moderate In FY25: Systematix

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Systematix Research Report.Supreme Industries Ltd.’s Q2 profit after tax beat was driven by higher Ebit in pipes (up 135 basis points QoQ at 13.3%; Rs 19/kg) and packaging (up 568 bps QoQ at 13.6%, Rs 32/kg) divisions. Pipes (up 30% YoY) led to a strong and inline total volume (up 23%). Tracking H1 volumes (up 30%, pipes up 39% YoY), management sees FY24 volume growth at 23%, led by pipes (up 28%). However, a moderate 12% volume growth is expected in FY25 on a normalised base. Acquisition of Parvati Agro will boost capacity by 36kt (including 3kt of O-PVC pipes, large opportunity from replacement of ductile iron pipes). A Rs 9 billion capex plan (to be funded through internal accruals) will enhance total capacity to 1 million tonne (pipes capacity to reach 750 kt by FY24 end versus 600 kt currently). We increase Supreme Industries’ FY24E earnings by 6% on better-than-expected margins in Q2. However, FY25 estimates are kept unchanged. We thus estimate 11%/19%/17% compound annual growth rate in revenue/Ebitda/profit after tax over FY23-25E, on healthy ~17% volume CAGR (20% in pipes) and normalised Ebitda margins (~15%). Despite elevated capex, Supreme Industries should sustain strong free cash flows and healthy return on equity/return on capital employed (~20%/ 25% in FY25E). While we like Supreme Industries for its leading positions in pipes and other divisions combined with strong cash flow generations, we maintain 'Sell' rating owing to rich valuation (~48 times FY25E price/earning). Our revised target price stands at Rs 3,514 (earlier Rs 3,489), based on 38 times FY25E P/E..Click on the attachment to read the full report:.APL Apollo Tubes Q2 Results Review - No Surprises; Free Cash Flow Improves Sharply In H1: IDBI Capital.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Supreme Industries Q2 Results Review - Strong Volume Growth In FY24 To Likely Moderate In FY25: Systematix

Continued capex to support growth.

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