The Supreme Industries: Revenue from industrial products up by 37.9%; Accumulate

CD Equisearch Pvt Ltd | Jan. 22, 2019, 1:13 p.m.

Valuation
The stock currently trades at 28.7x FY19e EPS of Rs 36.31 and 24.9x FY20e EPS of Rs 41.86. Barely striking growth in its scarcely diminishing plastic piping systems business (measly 9% growth in FY18; 6% in H1FY19) and near stagnant off take in capacity stricken packaging products business suppressed volume growth in last few quarters. Backed by recovery in volume growth and stability in margins (despite firm resin prices), earnings would grow in mid teens next fiscal. Return on capital would all but flat line in the ensuing period. On lower than estimated revenue growth we cut our current year EPS estimate by 4.4%. Weighing odds we maintain our accumulate rating on the stock with revised target of Rs 1214 (previous target: Rs 1416) based on 29x FY20e EPS of Rs 41.86 (3 year average TTM: 33x).



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