scorecardresearchStock Analysis: Supreme petrochemicals
Supreme Petrochem Ltd. is a joint venture between the Rajan Raheja Group and Supreme Industries Ltd.
Supreme Petrochem Ltd. is a joint venture between the Rajan Raheja Group and Supreme Industries Ltd.

Stock Analysis: Supreme petrochemicals

Updated: 01 Apr 2022, 07:39 AM IST
TL;DR.

Supreme petrochem, a pioneer in the Indian plastics industry Founded in 1942, is a well-known brand. They are effectively the country's largest polymer producer, with annual quantities of approximately 3,50,000 tonnes.

Supreme Petrochem Ltd, is India’s largest producer and global supplier of Polystyrene (PS), accounting for 90% of its total revenue. They possess two state of the art production facilities at – Amdoshi-Wangani, Maharashtra and Chennai, Tamil Nadu.

Each year, the firm processes roughly 320,000 tonnes of polymers. The company manufactures industrial and engineering moulded furniture, storage and material handling crates, multi-layer sheets, packing films, expanded polyethene foam, PVC pipes and fittings, moulded furniture, sataranj, and mats.

Supreme Petrochem Ltd. is a joint venture between the Rajan Raheja Group and Supreme Industries Ltd. The company's products are sold in over 100 countries throughout the world.

Supreme, which was founded in 1942, is a pioneer in the Indian plastics industry. With yearly volumes of over 3,50,000 tonnes of polymers, are effectively the country's largest.

The company specialises in Moulded Furniture, Storage & Material Handling Products, XF Films & Products, Performance Films, Industrial Moulded Products, Protective Packaging Products, Composite Plastic Products, Plastic Piping Systems, and Petrochemicals.

Industry Overview

With the production of polystyrene in 1957, India's plastic industry got off to a promising start. Significant progress was made, and the industry quickly expanded and diversified. More than 2,000 exporters work in the industry across the country. 

It employs around 4 million people and has around 30,000 processing units, with 85-90 percent of them being small and medium-sized businesses.

In July 2021, India exported plastic raw materials worth US$ 352.04 million, with a total export of US$ 1.57 billion from April to July 2021.

From April to August 2021, total plastics raw material exports amounted up to US$ 1.57 billion. India exported $3.29 billion worth of plastics raw materials in FY21.

From April through August 2021, total plastic and linoleum exports amounted to US$ 4.15 billion, with US$ 754.37 million for August 2021. In FY21, total plastic and linoleum exports amounted to US$ 7.45 billion, with US$ 719.15 million in March 2021.

India’s plastic and linoleum exports amounted to $7.55 billion in FY20. Plastic sheets, films, and plates exports totalled to US$ 1.53 billion in FY21, while packaging material exports accumulated US$ 863.62 million.

Revenue Breakup of Supreme Petrochemicals

The market is segmented into polystyrene, acrylonitrile Butadiene Styrene, styrene-butadiene rubber, and other product types if we go by product type. Polystyrene, expanded polystyrene, and Acrylonitrile-Butadiene-Styrene (ABS) are the three largest Styrene derivatives representing nearly 70-80% of Styrene demand. 

Polystyrene is widely used in refrigerators, air conditioners, washing machines, artificial jewellery, household goods and electrical appliances.

 

Revenue Break up of Supreme Petrochem Ltd
Revenue Break up of Supreme Petrochem Ltd

Polystyrene is a versatile material that can be used in a wide range of consumer items. It is widely used in products that demand clarity, such as food packaging and laboratory gear, because it is strong, solid plastic. 

When coupled with various colourants, additives, or other polymers, polystyrene is used to produce appliances, electronics, vehicle parts, toys, gardening pots, and equipment.

Expanded polystyrene (EPS) is a thermoplastic product that is rigid, tough, and lightweight. EPS is a white material made of pre-expanded polystyrene beads.

Polystyrene Market to be Driven by Growing Packaging Industry – The rise of the worldwide packaging sector has been a significant driver for the global polystyrene market over the last few years due to the nature of polystyrene as one of the most trusted packaging materials used by mankind.

Financials

 Financials Standlone ( Cr) 20212020201920182017
 Operating Revenue3,185.172,724.253,193.813,026.612,918.62
Total Income3,206.452,736.183,203.843,034.632,926.11
Total Expenditure2,516.252,575.753,100.462,830.342,621.34
EBITDA668.92148.4993.35196.27297.28
EBIT629.78112.4670.08175.52275.06
Profit Before Tax  643.78117.9076.16178.94277.85
Profit after tax477.49102.6549.21116.12179.41

The company reported a 71.56 per cent increase in growth in total revenues for the October-December quarter on a consolidated basis at 1,190.76 crore. The revenues were higher by 13.64 per cent on a sequential basis compared to 1,047.79 crore in April-June of 2021.

Performance of the Stock

The stock gave a 3-year return of 321.33% as compared to the Nifty Midcap 100 which gave a return of 60.7%. (as of last trading session)

Price PerformanceChange (%)         
1 Week 23.50
1 Month28.60
3 Months8.60
1 Year116.05
3 Years305.57
5 Years196.35

In the last 17 years, only 4.05 % of trading sessions saw intraday declines higher than 5 %.

Peer Comparison

Company NamePrice% ChgMcap (Cr)TTM PEP/BROE(%)1 Yr Perform (%)Net Profit (Cr)Net sales Debt to Equity
Supreme Petro925.55-1.258,702.0813.008.1744.84116.054773,1850.00
Aarti Ind956.651.5634,678.9527.7511.5714.9445.235354,5060.71
Gujarat Fluoro2,742.55-3.1830,126.9144.418.66-6.26376.84-2213,7310.40
Atul10,292.55-0.6730,452.6247.367.9017.1345.316523,7310.03
Clean Science1,992.40-1.0521,163.07-39.1936.73-1985120.00

Road Ahead

Supreme Petrochem plans to increase its Polystyrene and Expandable Polystyrene manufacturing capacity by 120,000 MT between March and May 2022. The board has previously approved a 30,000 MTA expansion of the company's Expandable Polystyrene facility in Nagothane, Maharashtra. 

The board also approved the installation of the second line of Extruded Polystyrene Board (XPS) with a capacity of 1,00,000M3 and a 50,000 MTA increase in Masterbatch and Compounds capacity. Internal accruals will be used to fund the CAPEX.

Increased capacity and solid demand from end-user industries will drive Supreme Petrochem's future expansion. In recent quarters, the company's performance has been outstanding.

Risks such as foreign pricing and raw material price inflation can, nevertheless, have an impact on the company's performance. Furthermore, a delay in capacity growth may have an impact on the company's success.

Note: The above information is provided solely for educational purposes. Investing in financial markets involves risk; therefore, before making investment decisions, please consult your financial advisor.

Things to know about multibagger stocks
Things to know about multibagger stocks
First Published: 01 Apr 2022, 07:39 AM IST