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IDBI Capital Report
Supreme Industries Ltd.'s Q2 FY25 result was below our estimates on key parameters. Volatility in raw material prices led to de-stocking in Q2 and dented sales volume. Further, the company incurred Rs 350-Rs 400 million inventory loss which weighed on operating margin.
The management anticipates resin prices to stabilize or marginally go up and may aid in NSR improvement and higher sales volume. Given weak H1 FY25 performance, the company has lowered plastic pipes volume guidance from earlier 25% to 16%-18% in FY25.
Accordingly we have cut our earnings estimates for FY25E/FY26E. Supreme Industries reported net sales of Rs 22.7 billion, marginally down by 1.5% YoY, while Ebitda came in at Rs 3.1 billion, declined by 10.4% over Q2 FY24. It reported net profit of Rs 2 billion, lower by 15% YoY.
We maintain Hold rating on the stock with a revised target price of Rs 4,821 (earlier Rs 5,455), assigning 45 times PER on FY26E.
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