Q2FY20 result highlights
Key positives: Another blow out quarter for pipes.
Key negatives: Weakness across non-pipes segments, inventory losses.
Impact on financials: FY20E/21E EBITDA cut by 6% each.
Valuations & view
Pipes performance continued to be superlative during Q2, this time contributed by higher margin segments like plumbing and infrastructure. Agri-related sales should pick-up over H2 as monsoons subside and SI’s increasing confidence in DWC also suggests that pipes growth would remain robust for FY20E and this should continue into FY21E as well. However, weakness in packaging/industrial segments remains concerning. Weak polymer realisations too would affect growth for the non-pipes segments for the rest of the year. Nevertheless, we believe SI’s focused approach towards profitable growth should keep them in good stead during these challenging times. Maintain Outperformer with a SOTP target price of Rs1,191 (28.6x implied FY21E P/E) and we would advise to build positions during stock price weakness.
Supreme Industries is engaged in the manufacture and sale of a range of plastic products in India. Co. has forayed into different types of plastic processing in Injection Moulding, Rotational Moulding (ROTO), Extrusion, Compression Moulding, Blow Moulding etc. Co. offers a range of plastic products with a variety of applications in Mulded Furniture, Storage & Material Handling Products, XF Films & Products, Performance Films, Industrial Moulded Products, Protective Packaging Products, Composite Plastic Products, Plastic Piping System & Petrochemicals. Co. handles volumes of over 320,000 tonnes of polymers annually.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
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