Target: ₹4,200
CMP: ₹3,630.80
Supreme Industries reported a strong Q4FY26 with volumes growing 16 per cent year on year to 231,889 tonnes and EBITDA margin expanding 391 bps to 17.7 per cent, aided by an inventory gain of about ₹70-80 crore from the PVC price spike in March.
Plastic piping was the standout with Q4 revenue up 23.3 per cent and volume up 18.3 per cent, aided by continued capacity expansion and channel restocking. Packaging revenue grew 7.2 per cent and volume 10.1 per cent, with focus on value-added offerings. Agri demand has picked up in Q1 post PVC price correction, with no major inventory issues at the distributor or retail level.
The company has committed over ₹1,000 crore in capex for FY27 (including carry-forward), focused on greenfield piping projects at Patna (Bihar), Jammu, Gadegaon (Maharashtra) and a material handling facility at Malanpur (Madhya Pradesh). All capex will be funded via internal accruals, maintaining zero-debt status.
The management has guided for FY27 volume growth of 12-13 per cent overall and 15-17 per cent for plastic piping, with EBITDA margin guidance of 14-14.5 per cent. The stock has moved up 10 per cent in the past three months on the back of higher PVC prices. We downgrade SI to Accumulate and cut our earnings estimates by 8 per cent/9.2 per cent for FY27E/28E respectively, to factor in lower margins. We raise our TP to ₹4,200 from ₹3,980 as we roll forward to March 2028E with an unchanged P/E of 40x.