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Supreme Industries falls 3% as brokerages slash target price
While maintaining buy call on Supreme, CLSA said it cut the price to Rs 1,320 from Rs 1,387 per share earlier after it slashed FY20 & 21 earnings estimates by 8 percent.
Supreme Industries shares fell 3 percent intraday on May 8 as brokerages cut their earnings estimates of the company. The company reported its fourth-quarter earnings recently.
The stock was quoting at Rs 1,014, down 2.30 percent on the BSE, at 11:17 hours IST.
While maintaining buy call on Supreme, CLSA said it cut the price to Rs 1,320 from Rs 1,387 per share earlier after it slashed FY20 & 21 earnings estimates by 8 percent.
During March quarter, inventory losses impacted margin and volume growth was moderate at 10 percent YoY, the brokerage said, adding management highlighted peak pricing pressure in cross-laminated films.
CLSA sees an improving demand environment for the piping segment.
The plastics product maker reported a sharp 39 percent year-on-year decline in its March quarter net profit at Rs 101.7 crore, and revenue increased moderately by 4 percent to Rs 1,530.9 crore.
Supreme Industries' plastic piping segment, which contributed around 57 percent to total sales in FY19, posted volume growth of 14.7 percent and value growth of 14 percent for the quarter.
Government initiatives, such as affordable housing, effective implementation of RERA, Swacch Bharat Mission, AMRUT Yojana, and other infrastructure-related activities gave a boost to the plastic piping segment.
For the past eight quarters, the company has been facing increased competition in the cross-laminated film business. This has led to price cuts and a
margin decline. However, management believes margin has bottomed in this segment and does not expect any further price cuts.
"This is evident from the fact there was an improvement of 1 percent in sales per kg and 7 percent in EBITDA per kg in the packaging business during Q4," said Elara Capital which reiterated buy call on the stock but reduced price target to Rs 1,393 from Rs 1,514 earlier.
Management has guided for volume growth of 8-10 percent and sales growth of 12-15 percent for FY20. Margin guidance was in the range of 13.5-
15.0 percent.
Elara Capital kept its sales estimates unchanged while cut EBITDA estimates by 9.0 percent for FY20 and 8.0 percent for FY21 and lower PAT
estimates by 8.8 percent for FY20 and 6.9 percent for FY21. "We do not see any shift in business fundamentals and bullish."
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