With a market cap of Rs. 8,662.12 crore, Supreme Petrochem Ltd. is a mid-cap company that operates in the petrochemical industry. Supreme Petrochem Ltd. (SPL) shares have provided a multibagger return of 351% over the past three years, and a multibagger return of 150.31% over the past five years. According to statistics of Value Research, SPL is a debt-free company. The brokerage firm KRChoksey has set a target price of INR 1,021 for the stock after the company’s PAT for the quarter stood at INR 1,891 million, experiencing a remarkable growth of 29.3 per cent YoY.
The brokerage has said that “In Q1FY23, Supreme Petrochem’s (SPL) revenue from operation stood at INR 14,854 mn, up by 41.8% YoY, beating our estimate by 13.5%. Though on QoQ basis revenue was mostly flat, declining by 0.8%. The strong growth in revenue was on account of healthy volume growth coupled with improved realisations. Sales volume for the quarter grew 29% YoY to 70,943 MT against 54,924 MT in the corresponding quarter of previous year. EBITDA witnessed a healthy growth of 27.5% YoY to INR 2,517 mn, though sequentially EBITDA declined by 18.2% QoQ. EBITDA margin contracted by 190 bps YoY/361 bps QoQ to 16.9%. The fall in margin was due to change in product mix with reduced share of value-added products. PAT for the quarter stood at INR 1,891 mn, witnessing a strong growth of 29.3% YoY. Though sequentially, PAT was down by 16.1%. PAT margin contracted by 123 bps YoY/232 bps QoQ to 12.7%.”
KRChoksey has stated that “To cater to the increasing demand, SPL is undergoing capital expenditure for brownfield expansion to enhance its existing Polystyrene, EPS, Masterbatches & Compounds and XPS capacities. Projects for setting up of 4th line of Polystyrene and expansion of Expandable Polystyrene at both plant locations are now scheduled to be completed by August 2022 due to late arrival of some of the imported equipment. SPL has entered into an agreement for License and Basic Engineering Design with Versalis for Mass ABS, which is the favoured engineering plastic when it comes to application in automotive parts. Basic engineering package for the first line of this plant is expected to reach SPL by September 2022. Other than this, negotiations are underway with M/s Versalis to advance the second train of Mass ABS to complete both lines by March 2025.”
“The completion of PS and EPS expansion projects will help to drive future growth of SPL. Also, with new product launches and technology tie-up, SPL will put more focus on its exports segment. The management expects its exports to reach pre-covid levels by end of the current financial year. SPL also aims to increase its market share by further strengthening its relationships with existing clients and widening its customer base by adding more valueadded products in its product portfolio,” said KRChoksey.
“SPL is enhancing its PS and EPS production capacities to cater to the increasing demand for its products. With enhanced capacity and healthy demand from end-user industries, SPL will witness strong growth in the future. We expect SPL to clock 11.0%, 20.5% and 20.3% CAGR growth in its revenue, EBITDA and PAT over FY22-24E period. We continue to remain positive on the growth prospects of SPL. The stock is currently trading at a P/E multiple of 9.9x/8.6x on its FY23E/24E EPS of INR 88.7/102.1 respectively. We value the stock at 10x on its FY24E EPS of INR 102.1/share, which yields a target price of INR 1,021/share, an upside of 16.1% over the CMP. Accordingly, we recommend a “BUY” rating on the shares of Supreme Petrochem Ltd,” said the brokerage firm KRChoksey.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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