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Systematix Report
Supreme Industries Ltd.’s Q3 revenue/Ebitda/profit after tax (6%/25%/22% YoY) came inline with our estimates. Overall volumes rose 14% YoY (inline) led by pipes division (up 17%). Packaging (up 3%) and consumer (down 3%) remained in low growth lane.
Despite lower mix of value-added-products (~35%), Ebitda margin came healthy at 15.5%. Pipes realisation fell ~7% YoY and QoQ, tracking PVC price trend; Ebit (Rs 17/kilogram, 13% margin) came broadly stable QoQ.
Domestic PVC/ CPVC industry grew 15%/2% YoY over nine months FY24, while Supreme Industries grew 25% plus 8% respectively indicating market share gains.
Tracking 24% overall volume growth (30% in pipes) in 9 million, management has further upped its FY24 volume growth guidance to 30%, led by pipes.
Acquisition of Parvati Agro Industries Ltd. will boost capacity by 36 kt (including 3 kt of O-PVC pipes). A Rs 10 billion capex plan (to be funded via internal accruals) will enhance total capacity to 1 million tonne (pipes capacity to reach 750 kt by FY24 end versus 600 kt currently).
We maintain estimates and expect 14%/20%/18% compound annual growth rate in revenue/Ebitda/PAT over FY23-26E, on healthy ~20% volume CAGR and normalised Ebitda margins (15%+).
Despite high capex, Supreme Industries should sustain strong free cash flow and healthy return on equity/return on capital employed (~21%/26% in FY26E).
On rich valuation, we maintain 'Hold' with an unchanged Rs 4,000 target price (35 times FY26E price/earning).
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