Shares of Supreme Industries Ltd. climbed as much as 0.66 per cent to ₹1909.60 on the BSE during today's intraday, after domestic brokerage firm HDFC Securities made a "buy" call on the stock with a target price of ₹2,630/share, implying a 39 per cent upside potential from its previous closing price. HDFC Securities said Supreme Industries' results were in line with their estimates in terms of EBITDA and APT.
Supreme Industries' revenues were up 64% YoY to ₹2,210 crores in the June ending quarter. However, the operating profit margin fell to 435 bps year on year at 12 per cent due to a rise in employee costs and other expenses. The company's total expenditure during the June 2022 quarter jumped 66.96 per cent to ₹1,937.2 crore, compared with ₹1,120.1 crore in the corresponding period last year.
It reported a year-on-year (YoY) increase in consolidated profit after tax (PAT) of 25.61 per cent to 213.8 crore, up from 170.2 crore in the same period last year.
Over the last 3 years, on average, earnings per share have increased by 38% per year, but the company’s share price has only increased by 20% per year, which means it is significantly lagging behind earnings growth.
Further, Supreme industries have a strong return on equity of 24% and a ROCE of 27% (5-year average) respectively. It has a price-to-earnings ratio of (23.5x) compared to the peer average of (38.1x).
Earlier, Jefferies initiated a "buy" call on the stock with a target price of ₹2,540/share. It said SI's total capacity stands at 725K MT in FY22, much higher than peers, and is expected to expand by +75K MT to 800K MT by FY23.
Supreme Industries has pegged its FY23 Capex at Rs. 7 bn. The first phase in the Cuttack (East) and Erode (South) plants is expected to begin in Q2FY23.
So far this year, Supreme Industries' share price has tanked 14.85 per cent, and it fell 8.98% in the last one year. However, in the last one month, it delivered a positive return of over 10.56%.
Supreme Industries Ltd is a mid-cap stock with a market capitalization of ₹24,098.03 crore. The company offers a wide range of plastic products with a variety of applications, including plastic piping systems, packaging, and industrial and consumer products. Handling volumes of over 3,50,000 tonnes of polymers annually effectively makes the company the country's largest plastics processor, its website shows.
The promoters hold 48.85 per cent of the shares in the company. Mutual Funds increased their holdings from 17.11% to 17.38% in the June 2022 quarter. But FIIs have reduced their exposure in the June quarter to 15.9% from 16.16%.
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