With a market cap of Rs. 8,662.12 crore, Supreme Petrochem Limited is a mid-cap company dealing in the petrochemical industry. Supreme Petrochem Limited (SPL) shares have provided multibagger returns of 351% in the last three years and multibagger returns of 150.31% in the last five years. According to Value Research data, SPL is a debt-free company. Brokerage firm KR Choksey has set a target price of INR 1,021 for the stock as the company’s PAT for the quarter stood at INR 1,891 million, which is experiencing a significant growth of 29.3 per cent year-on-year.
The brokerage has stated that “In Q1FY23, the revenue from operations of Supreme Petrochem (SPL) was INR 14,854 million, up 41.8% YoY, beating our estimate by 13.5%. However, on a quarter-on-quarter basis, the revenue was mostly remained flat, declining 0.8%. Strong revenue growth was driven by good sales growth as well as better realizations. Sales volume for the quarter grew 29% YoY to 70,943 MT as compared to 54,924 MT in the same quarter last year MT. EBITDA witnessed a healthy growth of 27.5% YoY to INR 2,517 million, though sequentially EBITDA declined by 18.2% QoQ. EBITDA margin shrank to 16.9% from 190 bps YoY/361 bps QoQ. Margin decline This was due to change in product mix with lower share of value added products. PAT for the quarter stood at Rs 1,891 million, showing a strong YoY growth of 29.3%. However sequentially, PAT was down 16.1%. PAT margins Shrinked by 123 bps YoY/232 bps QoQ by 12.7%.”
KR Choksi has stated that “To meet the growing demand, SPL is undergoing capital expenditure for augmenting its existing Polystyrene, EPS, Masterbatches and Compounds and XPS capabilities for brownfield expansion. Due to the late arrival of some imported equipment. Due to the installation of fourth line of polystyrene at both the plant locations and the expansion projects of expandable polystyrene are now to be completed by August 2022. SPL has entered into an agreement with Versalis for license and basic engineering design for Mass ABS , which is the preferred engineering plastic for application in automotive parts. The basic engineering package for the first line of this plant is expected to reach SPL by September 2022. In addition, the second line of mass ABS to complete both lines by March 2025. Negotiations are on with M/s Versalis to proceed with the train.”
“The completion of PS and EPS expansion projects will help drive the future growth of SPL. Also, with new product launches and technology tie-ups, SPL will focus more on its export segment. The management expects its exports to reach pre-Covid levels by the end of the current financial year. SPL aims to increase its market share by further strengthening its relationship with existing customers and adding more value-added products to its product portfolio.”
“SPL is increasing its PS and EPS production capacity to meet the growing demand for its products. With increased capacity and good demand from end user industries, SPL will witness strong growth in future. We expect SPL to register 11.0%, 20.5% and 20.3% CAGR growth in its Revenue, EBITDA and PAT in the period FY 22-24. We remain positive on the growth prospects of SPL. The stock is currently trading at a P/E multiplier of 9.9x/8.6x at its FY23E/24E EPS at INR 88.7/102.1 respectively. We value the stock at 10x the FY24E EPS of INR 102.1/share, achieving a target price of INR 1,021/share, which is 16.1% higher than the CMP. Accordingly, we recommend “Buy” rating on the shares of Supreme Petrochem Ltd,” said brokerage firm KR Choksi.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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