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Informist, Thursday, Jan. 16, 2025

By Aman Aryan

MUMBAI – Lower infrastructure spending and unfavourable sales mix would likely have weighed on Supreme Industries Ltd.'s earnings for the December quarter. Unlike in the September quarter, when volatile prices of polyvinyl chloride hit the company's performance, these prices were stable in the December quarter, analysts said.

Supreme Industries will likely report an on-year fall in consolidated net profit for the second consecutive quarter. However, unlike the September quarter, the company's earnings are estimated to improve sequentially. The company will likely post a consolidated net profit of INR 2.43 billion, down 5% on year but up 18% sequentially, according to the average of estimates from eight brokerage firms. The plastic manufacturing and processing company's consolidated revenue, on the other hand, is expected to rise 11% on year to INR 27.18 billion, according to the average from eight brokerage firms.

The estimates for the consolidated earnings of the company range from INR 2.03 billion by IDBI Capital Markets Services Ltd. to INR 2.65 billion by Anand Rathi Share and Stock Brokers Ltd.  Estimates for consolidated revenue range from INR 24.21 billion by IDBI Capital to INR 31 billion by Mirae Asset Sharekhan Ltd. 

The company's December quarter margins would have likely remained under pressure despite favourable raw material prices, analysts said. Although demand remained muted across the sector, Supreme Industries will likely report improved volume growth for the December quarter compared to the previous quarter. A higher share of agricultural pipes in the company's December quarter sales would also have affected its margins negatively during the quarter, Nuvama Institutional Equities said.

Despite the low demand due to the slowdown in the infrastructure and real estate sectors, Supreme Industries is expected to post a mid-single-digit to low-double-digit volume growth as it can garner market share by leveraging price, Elara Securities and Nuvama said. However, Mirae Asset Sharekhan expects Supreme Industries to be one of the laggards among the building material companies it tracks. 

All segments of the company, except consumer products, are expected to post healthy on-year volume growth for the December quarter, brokerages Nuvama and Prabhudas Lilladher said. A 12% volume growth is expected in the plastic pipes segment, 15% growth in the packaging segment, and 5% growth is expected in the industrial products segment, Nuvama said. However, the company's consumer products segment's volume is seen down 5% on-year. 

Supreme Industries will likely report consolidated earnings before interest, taxes, depreciation, and amortisation of INR 3.84 billion for the December quarter, according to the average of estimates from six brokerage firms. The company's EBITDA was INR 3.79 billion in the year-ago quarter and INR 3.19 billion in the previous quarter. While the consensus sees the company's EBITDA rising on year, IDBI Capital and Prabhudas Lilladher expect Supreme Industries to clock an on-year fall in its EBITDA for the reporting quarter. 

The company was testing the gas piping market with an initial production capacity of 3,000 tonnes per month and would likely start selling from the December quarter, Mirae Asset Sharekhan had said in its earnings review report after the company detailed its earnings for the September quarter. The brokerage estimates the annual market size for gas pipes at 100,000 tonnes.

On Oct. 28, the company said it had received approval from the Petroleum and Explosive Safety Organization to manufacture and market 265-litre type-IV composite compressed natural gas cylinders. It had already set up a pilot plant to manufacture these cylinders and expects to generate nearly INR 600 million of annual revenue from this business.  

IDBI Capital said it will watch for the outlook for demand for agricultural pipes, the company's plans for capacity expansion, new product launches, and the overall demand scenario in the near term. 

At 1039 IST, shares of Supreme Industries traded flat at INR 4,378 on the National Stock Exchange. The company is scheduled to report its earnings for the December quarter on Monday.

Following are the Oct-Dec earnings estimates for Supreme Industries Ltd. based on reports compiled by Informist from eight brokerages in descending order by the estimate of net profit:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Deepshikha Bhardwaj

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