scorecardresearchSupreme Industries trading near 52-week high, up over 36% in a year; should you buy?

Supreme Industries trading near 52-week high, up over 36% in a year; should you buy?

Updated: 03 May 2023, 08:27 AM IST
TL;DR.
Supreme Industries reported an year-on-year (YoY) increase in consolidated profit after tax (PAT) of 10.80% to 359 crore in Q4FY23, up from 324 crore in the same period last year. When compared to the December quarter of FY23, the net profit was up by nearly 71%.
On the financial ratio front, the company has zero debt, Trendlyne data showed, while it had an ROE and RoCE of 19.88% and 25.45%, respectively, in FY23.

On the financial ratio front, the company has zero debt, Trendlyne data showed, while it had an ROE and RoCE of 19.88% and 25.45%, respectively, in FY23.

Supreme Industries' shares, which were trading at 2,015 apiece a year ago, are now trading at 2,748.90, representing a gain of 36.42%. They have delivered an impressive return of nearly 670% over the last 10 years.

Supreme Industries is one of India’s leading plastic processing companies with a presence in four major segments, including piping systems, packaging products, industrial products, and consumer product category.

The stock has recorded a 12% gain so far this year, outperforming the Nifty 50 return of 0.20%. Using Tuesday's closing price of 2,748.90, the stock is just 3.71% away from its 52-week high of 2,855.

According to the recent projections made by the domestic brokerage firm ICICI Direct Research, the stock is expected to maintain its upward trajectory and could potentially reach an all-time high of 3,200 apiece in the next 12 months. 

The brokerage continued its bullish outlook on the stock following the company's strong performance in Q4FY23.

On April 28, Supreme Industries reported a year-on-year (YoY) increase in consolidated profit after tax (PAT) of 10.80% to 359 crore for Q4FY23, up from 324 crore in the same period last year. The net profit was up by almost 71% when compared to the December quarter of FY23.

The company is delivering steady growth in its net profit, quarter after quarter. In the second and third quarters of the current fiscal year, it posted a net profit of 82 and 210 crore, respectively.

It reported revenue growth of 1.6% YoY to 2,598 crore, led by 15% volume growth. Piping segment volume was up 16%, on the back of strong demand from the agriculture and infra segments. Seen sequentially, the revenues were up 12.41%.

The operating profit during the quarter came in at 480 crore, an increase of 22.76% compared to 391 crore in Q4FY22, while the EBITDA margin stood at 18%, an expansion of nearly 300 bps YoY and 500 bps QoQ.

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Stock Price Chart of Supreme Industries,

"We believe Supreme Industries reported a strong performance in Q4 FY23, led by strong volume growth in the plastic piping segment and inventory gains of 70 crore in Q4. For FY23, strong volume growth of 29% YoY was also led by the piping segment, which recorded volume growth of 37% YoY, on a favourable base and revival in demand post-correction in PVC prices."

“Going forward, the management has guided a strong volume growth in the piping segment for FY24E, led by capacity expansion in the new geographies, strong demand from the infra and housing segments, and the launch of new products,” said ICICI Direct Research.

The company has outlined a capital expenditure (capex) plan of 750 crore, which includes the carry forward capex of 150 crore from the previous year, for the fiscal year 2024. This investment will help increase the company's production capacity by approximately 20% on a year-over-year basis, it added.

The brokerage has stated that the entire capex will be financed through internal accruals, indicating that the company will use its own earnings and funds to cover the cost of the expansion.

ICICI Direct has projected an overall volume CAGR of 15% over FY23–25E, led by a piping segment volume CAGR of 16%. The brokerage firm believes that various government-sponsored initiatives such as Nal Se Jal Mission, Swatch Bharat Abhiyan, sanitation, and affordable housing will be the key drivers of Supreme Industries' volume growth even on a higher base of FY23.

On the financial ratio front, the company has zero debt, Trendlyne data showed, while it had an ROE and RoCE of 19.88% and 25.45%, respectively, in FY23. The company spends less of its earnings on dividend payments, as the payout ratio stands at 28.08%. For FY23, the company declared an equity dividend amounting to 44 per share.

23 analysts polled by MintGenie on an average have a 'buy' call on the stock.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.

 

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First Published: 03 May 2023, 08:27 AM IST

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