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ICICI Direct Report
Margin expansion drives profitability. Supreme Industries Ltd. reported revenue growth of ~1.6% YoY to ~Rs 2598 crore led by ~15% volume growth. Piping segment volume was up 16% led by strong demand from agriculture and infra segment.
Gross margin up by 559 basis points YoY led by inventory gains and stable PVC prices. As a result, Ebitda margin was up 318 bps YoY to 18.5%.
Profit after tax grew 11% YoY to Rs 359.4 mainly due to Ebitda margin expansion.
Key triggers for future price performance:
The government's flagship ‘Nal Se Jal' scheme (with an outlay of ~Rs 3 lakh crore over the next five years) is a big booster for the domestic plastic piping industry over the long term.
Rising contribution of value added product in overall topline (increased from 35% in FY18 to ~37% in FY23) to keep Ebitda margin elevated.
The company is planning a capex of Rs 750 crore in FY24E to increase manufacturing capacity to ~9.5 lakh tonnes.
Model revenue compound annual growth rate of 15.7% led by ~15% volume CAGR over FY23-25E.
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