Plastic Products, Trending in the Economy

Infrastructure spending a game changer for Supreme Industries Ltd ?

Supreme Industries - India's leading processor of plastic.

https://youtu.be/lnvO1T_zbEk

Quick Links Click to navigate directly to the relevant paragraph in detail :

(A) About

Supreme Industries - logo

Supreme Industries Limited is India’s leading plastics product manufacturer, offering a wide and comprehensive range of plastic products in India.

Additionally, the company operates in various product categories viz. Plastic Piping System, Cross Laminated Films & Products, Protective Packaging Products, Industrial Molded Components, Molded Furniture, Storage and also Material Handling Products, Performance Packaging Films and Composite LPG Cylinders.

Moreover, the company has built-up excellent relationship with its distributors and is also providing orientation to them. In order to ensure proper service to ultimate customers. Furthermore, it has 4,053 active channel partners as on 31st March 2022.

(B) Journey

(C) Shareholding Pattern

Supreme Industries - Shareholding Pattern
Supreme Industries - Shareholdings

(D) Board of Directors

(E) Business Segments

Supreme Industries - Business verticals

(i) Plastic Piping Division

This segment is the Major contributor of the revenue and the major products sold under this division are PVC pipes, fittings, Toilet bath fittings, and also Moulded tanks and many more. The Company also sold 3,00,772 Tons of Pipe System making it as a market leader in this segment.

(ii) Packaging Products

This division contributed 14.9% of the total revenue which consist of Flexible packaging film products, Protective Packaging Products as well as Cross Laminated Film products.

Moreover, the packaging division witnessed the highest growth of 15% attributed by strong demand from the Diary & Edible oil Industry

(iii) Industrial Products

Industrial Components, Material handling System and Pallets - Roto molded crates, pallets and garbage bins and also Composite LPG Cylinders are the products manufacture in this division catering to various Industries from Auto to Agriculture.

(iv) Consumer Products

Furniture is the major products sold under this division and the product is sold through 13000+ retailers and the company is planning to add another 1500 in the coming year. Moreover, company is second largest player in the molded Furniture with a processing capacity of 30,000 MT.

(F) Segment Revenue

(i) Revenue Segmentation

Supreme Industries - Revenue segment

(ii) Geographical wise Breakup

Supreme Industries - Geographical revenue

(G) Manufacturing Capacity

Supreme Industries - Manufacturing Capacity

The total capacity at the beginning of the year was ~7,25,000 MT per annum which by the end of this
financial year stood at ~8,13,000 MT per annum.

Moreover, the company has 28 technologically advanced manufacturing facilities located at various places spread across the country.

(H) Peers Comparison

Supreme Industries - Peers Comparision

(I) Cost Structure

Supreme Industries - Cost Structure

Raw material Expense took the major chunk of sales accounting ~70%, Whereas Employee Cost accounts for 4.46%.

On the other hand, ~4% of expense has been incurred on Selling and admins.

During FY21-22, Company has faced very tough times due to drastic fluctuation in the raw material prices of PVC.

(J) Financial of Supreme Industries

Supreme Industries - Financial Trend

Company’s revenue increase at a CAGR of 8.61%, meanwhile its Profit after tax increase at a CAGR of 13.70%.

Moreover, its PBITDA margins remains with in the range of 15-17% except for FY21. Further company has been reducing its debt over the last 10 years.

Supreme Industries - Du pont Analysis

Asset to Equity improved from 2.31 to 1.30 while its Sales to total assets improve from 1.67 to 1.56.

(K) Management Discussion & Concall

Outlook

-The Indian plastic piping is worth ₹34,000 cr, wherein the organized players also have about 65% of the market.

-The Division’s Value-Added Products sale was 41.89% compared to 39.27% in the previous year.

-Company is now also focusing on creating large retail showrooms for displaying plastic furniture in an attractive manner. Moreover, the Company opened 22 such showrooms in Eastern India in 21-22 and plans to have total 100 such showrooms by close of 22-23.

-In Industrial products segment company is consistently engaging with its diverse industrial customers to gauge and understand their industry and application specific needs of Pallets and developing new models both for one time and repeated use.

Q3FY23 Highlights

  • During the quarter, the company witnessed good demand from agriculture, housing and Infrastructure.
  • Overall turnover of value-added products increased by 24% YoY to ₹826 crore in Q3 FY23 as compared to ₹665 crore in Q3 FY22.
  • The profit of plastics & piping system business was impacted due to drop in prices by ₹66 per kg, i.e., 45% since April.
  • The new greenfield project for plastic piping system at Erode in Tamil Nadu commenced commercial production from December 2022.
  • The new plant at Cuttack in Odisha is likely to commence commercial production in February 2023.
  • In FY23, the management anticipates volume growth of ~25%, revenue of more than ₹9,000 crore and operating margin of more than 12.5%.

Growth Drivers

  • Government Infrastructure spending
  • Increasing Construction activities
  • Increasing Industrial production
  • Rising demand from irrigation sector
  • Replacement of aging pipes
  • Shift from unorganized to organized players
  • Various schemes like Jal Jeevan Mission, Swatch Bharat Abhiyan, etc.
  • Heavy investment by government in irrigation, housing & sanitization

(L) Strengths & Weakness

Strengths

(i) Diversified revenue

Supreme Industries produces plastic-based products for piping systems (accounted for 66% of revenue in fiscal 2022), industrial goods (16%), consumer goods (5%) and also packaging products (13%). Additionally catering to a diverse end-user profile mitigates the risk of slowdown in any segment or industry.

Furthermore, revenue is supported by the increasing contribution of value-added products (38% during fiscal 2022), which have operating margin of over 17%.

(ii) Healthy market position across business segments

Supreme Industries has an established track record and strong market position in each segment it operates in, also backed by its widespread distribution network and the ability to introduce new products.

(iii) Robust financial risk profile

Financial risk profile is also marked by a comfortable net worth, nil debt, healthy liquidity and strong debt protection metrics. Furthermore, net worth is expected to be over Rs 4,200 crore as on March 31, 2023, with steady growth in cash accrual and nil gearing.

Weaknesses

(i) Susceptibility to intense competition and volatility in raw material prices

Prices of key raw materials, polyvinyl chloride, high-density polyethylene and polypropylene remain susceptible to movement in crude oil prices and foreign exchange rates, though Supreme has the ability to pass on any price fluctuations to consumers. 

With a large raw materials component in revenues (forming about 65-70%), the company also remains exposed to volatility in input prices, as particularly seen in fiscal 2023.

Drop us your query at – info@pawealth.in or Visit pawealth.in

References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry Publications.

Disclaimer: The report only represents the personal opinions and views of the author. No part of the report should be considered a recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

Most successful stock advisors in India  | Ludhiana Stock Market Tips  | Stock Market Experts in Ludhiana | Top stock advisors in India | Best Stock Advisors in Gurugram | Investment Consultants in Ludhiana | Top Stock Brokers in Gurugram | Best stock advisors in India | Ludhiana Stock Advisors SEBI | Stock Consultants in Ludhiana | AMFI registered distributor | Amfi registered mutual fund | Be a mutual fund distributor | Top stock advisors in India | Top stock advisory services in India | Best Stock Advisors in Bangalore

Leave a Reply

Your email address will not be published. Required fields are marked *

Search

Recent Post

Have Any Question?

Do not hesitate to contact us. We’re a team of experts ready to talk to you.

+91 99882 75566

info@pawealth.in

Connect With Us