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  • Stock recommendation: Supreme Industries Ltd – ACCUMULATE – TP Rs.1324

    Publish date: 1st August, 2018


    Result Update

    Supreme Industries Q1FY19 results was broadly inline with estimates with volume grew by 8.4% largely on account of strong performance in packaging, industrial and consumer segments.

    Key Highlights

    • The company reported 15.8% yoy growth in revenue which was driven by 8.4% yoy growth in volume and 7.2% yoy growth in realization. The volume growth was better than our estimates due to strong growth in consumer, industrial and packaging segment.
    • EBITDA margins at 13.8% was broadly inline with our estimates. The company expects EBITDA margins to be around ~15.5-16% in FY19E.
    • The company is positive on industrial, consumer and packaging segment. The company is not positive on agri pipes due to lower demand and margins but maintains positive demand outlook on pipe from real estate sector. Based on this, the company has reduced volume growth guidance from 12-15% to 10-12% for FY19E.

    Valuation & outlook

    We have maintained our FY19E & FY20E estimates. We expect earnings to grow at faster pace in FY19E and FY20E on company's ability to maintain strong margins.

    The stock is presently trading at PE of 33.6x and 26.4x on FY19E and FY20E EPS of Rs 35.9 and 45.6 per share, respectively.

    We upgrade our rating on the stock to Accumulate (Vs Reduce earlier) with unchanged target price of Rs 1324, valuing the stock at 29x on FY20E earnings.

            

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