The current P/E is 17.13 (18/10/2013).
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The company held its conference call on 29thOctā13 and was addressed by Mr. M P Taparia MD
Key highlights by Capital Market:
During the quarter ending Sepā13, Supreme industries processed 49978 MT of polymers, almost flat on y.o.y and reported net sales of about Rs 705.14 crore, up by 14% y.o.y. About 27.9% of total sales were value added products as compared to 30.3% y.o.y.
For the Sepā13 quarter, Plastic piping segment reported a 7% kind of volume growth to around 32337 MT, while the value wise, the growth stood at 22% to Rs 367 crore. Plastic piping margin for Sepā13 quarter, stood at 15.3%, as compared to 14.8% for Sepā12 quarter.
The packaging segment reported a fall of 6% in volumes to 6915 MT and value growth stood at4% at Rs 129 crore. The segmental margin for Sepā13 quarter, stood at 15.7%, as compared to 18% for Sepā12 quarter.
The industrial product segment reported 13% decrease in volume to 7486 MT and value was up by 4% at Rs 134 crore. The margin for Sepā13 quarter stood at 9% and was almost flat YoY.
Consumer Product segment reported 8% fall in volume and value growth was almost flat at around Rs 50 crore and segmental margin for Sepā13 quarter stood at 4%.
CPVC sale for Sepā13 quarter grew by about 25% in value terms and management expects the year to end with value growth of about 40%. For 12 months ending Juneā12, the CPVC sales stood at Rs 213 crore. The company has capacity of about 9000 MT of CPVC.
During the quarter ended Sepā13, the industrial subsidy value stood at Rs 7 crore. After Sepā13, subsidy of about Rs 45 crore continues to be pending, which is to be claimed in next couple of years.
Management is confident of about 12% volume growth and 22% value growth for 12 months ending Juneā14.
During the Sepā13 quarter, the flat volume growth was due to unprecedented price increase in raw materials between 15-19% in less than 2 months of time, due to severe volatility on forex and crude front. Also extended monsoon, delayed some of the activities and hence demand was lower in general.
For 12 months ended Juneā14, management expects plastic piping to grow about 15%, furniture about 3%, industrial division about 9% and plastic packaging business about 20%.
In automobile, except Maruti, things are going slow with other OEMās.
Management expects to sell about 23000 tons of cross laminated films in 12 months ending Juneā14 as compared to about 17000 tons in 12 months ended Juneā13.
Borrowing as of Sepā13 stood around Rs 475 crore which will further be increased by about Rs 75 crore during the year.
The company has tied up for about 26500 sq feet of about 160 thousand sq feet of saleable area ready and vacant. It expects to garner sum of about Rs 40-50 crore in 12 months ending Sepā13.
Margins at operating level will remain around 14-15% for 12 months ending Juneā14. Continuous increase in high value added products together with newer capacities will help the margins.
There was not much inventory gain or loss during Sepā13 quarter.
The company has envisaged capex plan of about Rs 230 crore for 12 months ending Juneā14. This includes a Plastic piping system plant at Kharagpur in West Bengal, protective packaging system unit at Kharagpur Complex, new products in furniture business and to replace some capacity of moulding machines, to increase pipe production capacity at Gadegaon and introducing several new varieties of fittings at Jalgaon and Malanpur and to invest further in automation in several of its existing units and investments in equipments for composite pallets.
The company held its conference call on 22ndJanā14 and was addressed by Mr. M P Taparia MD:Key highlights by Capital Mkt;
During the quarter ending Decā13, Supreme industries processed 66318 MT of polymers, almost flat on y.o.y and reported net sales growth of about 15% y.o.y. About 33.5% of total sales were value added products as compared to 32.4% y.o.y.
For the Decā13 quarter, Plastic piping segment reported a 3% kind of volume growth to around 42388 MT, while the value wise, the growth stood at 20% to Rs 457 crore. Plastic piping margin for Decā13 quarter, stood at 13.5%, as compared to 14.8% for Decā12 quarter.
The packaging segment reported a growth of 16% in volumes to 12125 MT and value growth stood at 25% at Rs 249crore. The segmental margin for Decā13 quarter, stood at 17.6%, as compared to 18.5% for Decā12 quarter.
The industrial product segment reported 21% decrease in volume to 7747 MT and value was down by 13% at Rs 134 crore. The margin for Decā13 quarter stood at 8.9% as compared to 11.5% for Decā12 quarter.
Consumer Product segment reported 15% fall in volume to 4058 MT and value growth was almost flat at around Rs 68 crore and segmental margin for Decā13 quarter stood at 7% as compared to 12% for Decā12 quarter.
CPVC sale for H1 grew by about 25% to Rs 122 crore and volume stood at 4110 MT. The company has capacity of about 9000 MT of CPVC.
During the quarter ended Decā13, the industrial subsidy value stood at Rs 9.85 crore. After Decā13, subsidy of about Rs 35-37 crore continues to be pending, which is to be claimed in next couple of years.
Gross margin of the company is at historical low, not seen in past 15 quarters largely due to lack of volume growth, lower demand, and uncertain raw material prices. However management expects margins to increase and to end the year with about 14% once the volume comes in H2.
The consumer durable segment was down by about 20% in Decā13 quarter affecting the growth of the company. Based on the interactions with the industry players, the management expects a flat growth of consumer durable segment in Jan-Juneā14 period.
Management is confident of about overall 9-10% volume growth and 20-22% value growth for 12 months ending Juneā14. The growth was curtailed lower due to continued slowdown in industrial and consumer durable side and also on lower demand from soft drink industry. Also demand was more of recycle and scrap material, where company was not present.
However management is confident of better growth in H2 as seasonally it is peak season. Also with the kind of squeeze in the demand that the company has seen in H1, management is confident that it will come back from Jan-Juneā14 period. Automobiles and industrial segment continue to go slow.
Intrest cost was up in H1, largely due to increase in working captial. Company expects debt to come down by about Rs 250 crore to around Rs 550 crore by the end of Juneā14. Largely due to incremental cash flows from business and also on improving the working capital and also money coming from sale of premises.
Management expects to sell about 23000 tons of cross laminated films in 12 months ending Juneā14 as compared to about 17000 tons in 12 months ended Juneā13.
The company has envisaged capex plan of about Rs 230 crore for 12 months ending Juneā14. This includes a Plastic piping system plant at Kharagpur in West Bengal, protective packaging system unit at Kharagpur Complex, new products in furniture business and to replace some capacity of moulding machines, to increase pipe production capacity at Gadegaon and introducing several new varieties of fittings at Jalgaon and Malanpur and to invest further in automation in several of its existing units and investments in equipments for composite pallets. About Rs 80 crore has been spent so far in H1 ended Decā13.
About 16 products have been introduced in Bathroom fittings by the company so far and another 11 new in the pipeline in next couple of weeks. The company has received good response and repeat orders for this new vertical.
A more than 20% fall in consumer durable segment, resulted in more than 18% fall in demand of Polystyrene which is the finished product of Supreme Petrochemicals. This has led to poor show by the company. Management expects things to revive and improve in H2, however, a spurt is not expected.
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Calladdressed by Mr. M P Taparia MD.Key highlights by Capital Mkt The company sold about 275463 MT of plastic goods during 12 months ended June'14, a volume growth of 2% on YoY basis. For the 12 months ended June'14, Plastic Piping business grew by 7% in volumes and 22% in value terms, the Packaging product business grew by 5% in volume terms and 6% in value terms, Industrial product de grew by 16% volume and 1% in value terms and Consumer business de grew by 18% in volume and 6% in value terms. CPVC volume for year ended June'14 stood at 10600 MT as compared to 9000 MT YoY and net sales stood at Rs 284 crore as compared to Rs 217 crore on YoY basis. Cross laminated volume for the year stood at 17510 MT which was same on YoY basis, and on value front net sales stood at Rs 394 crore as compared to Rs 365 crore on YoY basis. For the quarter ended June'14, the volume in plastic piping stood at 62750 MT as compared to 53109 MT YoY with sales at Rs 694 crore as compared to Rs 540 crore YoY and Margin for the segment stood at 17%, the volume in Packaging Product stood at 11120 MT as compared to 10580 MT YoY with sales at Rs 239 crore as compared to Rs 205 crore and Margin at 23%, for Industrial products volume stood at 8784 MT as compared to 10573 MT on YoY with net sales at Rs 145 crore as compared to Rs 165 crore and Margin at 16% and Consumer product business volume stood at 4209 MT as compared to 5467 MT on YoY with net sales at Rs 78 crore and Margin at 15.7%. During the year ended June'14, the value added product sale stood at 32.3% as compared to 31.7% YoY.Industrial component and material handling of the industrial product segment had de growth and management expects with stable government, confidence has revived and the segment will bounce back in year ended June '15 Management expects that except for furniture segment, there will be both volume and value growth in all the segments in 12 months ended June'15. For furniture as the company is shifting from commodity to premium segment there can be some de growth. The composite cylinders manufacturing facility at Halol of 4.5 lakh cylinders, have been approved by all regulatory agencies. The cylinders are Light in weight, rust free, leak proof, safe and are transparent in showing the gas levels. Company manufactures the cylinders in 6 different sizes. Currently the company is focusing on exports for these cylinders with about 50000 cylinders order in hand from Korea. Further, more enquiries coming from Kenya, UAE, Central Asia etc Current borrowing stands around Rs 469.91 crore as on June'14 average costs is 8.9%. Management does not expect the debt level to go up and fund the entire capex through internal accruals.The company would keep 6681 sq feet for internal use and total available area for sale left with the company stood at 142393 sq feet. Management is selling at around Rs 15500 per sq feet and does not expect sale of more than 20000 sq feet in 12 months ended June'15. Subsidy during the year stood at around Rs 47 crore. However the subsidy is expiring in Dec'14 and expects subsidy of around Rs 25 crore for the year ended June'15. So about 0.7% of margin loss will be there due to subsidy in the period ended June'15, however through value addition and high margin sales, management expects the margin to be protected. Supreme Petro had a bad year due to de growth in Polystyrene where due to lower demand from consumer durable segment resulted in pricing pressure on one hand and cheap imports from Singapore due to duty imbalance, hurt further. However, management expects good demand from consumer segment during the year and the imbalance of duty structure was addressed in the current budget. So year 2014-15 will be better than last year.Due to crude oil prices and the prevailing tensions hovering around, management expects the costs of plastic raw material may remain around current level.Management expects Revenue growth of about 15-20% on CAGR basis for next 3 years. |
Supreme industries is a very supreme in nature for last 46+ years. A great interview and views here in this video -http://www.supreme.co.in/video.html. It is covering how the business empire was built, roadmap, moats, ROCE from operating earnings as a goal, investor rewards, ā¦ (all required to understand the business in depth and breadth). This is a great yard stick company and emulating from Asian paints as a framework to run the business.
Thanks Muthu,
Very interesting video, However Mr Taparia seems very old, does that bother you?
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Call add by Mr. M P Taparia MD.Key highlights by Capital Mkt;
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There was a volume and value growth of 10% and 9% respectively for the quarter ended Decā14. OPM was lower during the Decā14 quarter due to inventory losses to the extent of around Rs 50 crore, due to continuous fall in polymer prices. Polymer prices fell 23% to 32% from peak level in Decā14 quarter
Margins were hit both due to lower demand as well inventory losses. Margins to recover on the back of better demand recovery for the second half ending Juneā15. However, the trend on inventory is difficult to gauge given the volatility in prices.
Customers emptied down their godowns. There is hardly any inventory now. Also, due to fall in polymer prices, they have become more competitive to recycle materials. Management expects price stability to achieve somewhere in Febā15. Once that happens, with no inventory, there will be a spurt in demand going forward.
Overall, the company expects volume growth between 12-15% and value growth between 8-10% during the current year ending Juneā15. That means the management expects strong volume and value growth in H2 on the back of improvement in demand.
Plastic Product value wise grew by around 2% and 4% in volume terms during the quarter. Volume for the quarter stood at 47675 MT vis a vis 42388 MT YoY. The segment reported an OPM of around 7.5% as against 14% for Decā13 quarter.
Packaging products value wise grew by 14% and volume wise grew by 7% to 12836 MT. OPM for the segment stood at 14.8% Vis 17.6% for Decā13 quarter.
Industrial segment reported a 19% value growth and volume growth of 13% on a low base of last year. OPM stood at 11.5% Vs 9% for Decā13 quarter.
Consumer segment saw a 1% decrease in value and an 8% reduction in volume to 3797 Mt with OPM of around 9.2%.
During the quarter, there was a Subsidy of Rs 10.09 crore vis a vis Rs 9.85 crore for Decā13 quarter.
CPVC volume for the quarter stood at 3094 MT compared to 2483 MT YoY Rs 81 crore of revenue as compared to Rs 64 crore
Value added product sale stood at 38.2% more or less flat as compared to last year.
Avg cost of debt stood at 8.34% p.a. Management expects significant improvement in working capital requirements.
Management expects another 53000 sq feet sale to happen and the same will be booked in H2 or early next year. This will be to the tune of around Rs 50 crore. After this sale, the company will be left with about 64000 sq feet of saleable area.
Supreme Petrochem suffered an inventory loss of about Rs 75 crore during the quarter. Imported raw material PS price which stood at US $1550 came down to US $ 900. Thus, entire profit was eaten away and severe loss happened during Decā14 quarter. Most of the inventory losses have been booked and cleared.
**Conf Call add by Mr. M P Taparia MD.**Key highlights by Capital Mkt;
There was a volume growth of 18% to 85732 MT and value growth of 8% to Rs 1028 crore for the quarter ended Marā15 on YoY basis.After inventory losses in Decā14 quarter, where polymer prices fell by around 25-30%, most of the polymer prices were on rising trend from Janā15 onwards. Around 2/3rdof loss in prices of polymers was recovered in Marā15 quarter and now on YoY basis, polymer prices are down by about 10%.There was some margin recovery seen in Marā15 quarter, largely due to inventory gain and higher sale of value added products. Sale of value added products stood at 33.26% Vs 30.46% on YoY basis.However, unseasonal rains and other natural calamities along with lower MSP prices will continue to weigh on farmers. Thus for Juneā15 quarter, while management expects volume growth; value will continue to be under pressure. Overall for the year ended Juneā15 management expects volume growth of around 12-15% and value growth of around 8-10%.
Plastic Product value wise grew by around 5% and 18% in volume terms during the quarter. Volume for the quarter stood at 59714 MT vis a vis 50527 MT YoY. The segment reported an OPM of around 13% for Marchā15 quarter.Packaging products value wise grew by 10% and volume wise grew by 20% to 10648MT. OPM for the segment stood at 16% for Marchā15 quarter.
Industrial segment reported a 6% value growth and volume growth of 14% on a low base of last year. OPM stood at 12% for Marchā15 quarter.
Consumer segment saw a 15% increase in value and an 21% increase in volume to 4432 MT with OPM of around 7%.During the quarter, there was a Subsidy of Rs 5.61 crore vis a vis 12.20 crore for Marā14 quarter.CPVC volume for the quarter stood at 2847 MT compared to 2869 MT YoY Rs 79 crore of revenue as compared to Rs 77 crore for Marchā14 quarter.
Avg cost of debt stood at 8.75% p.a. Management expects significant improvement in working capital requirements. The funds coming from real estate business will be used in repaying the loans and outstanding borrowing is expected to be reduced from around Rs 650 crore to around Rs 400 crore by Juneā15.
Management expects another 12500 sq feet sale of real estate to happen in Juneā15 quarter and income of around Rs 25 crore.Capex of Rs 270 crore is progressing well and as per the internal plan of the management.Composite Cylinder enquiry is at all time high, however it will take some more time before actual conversion happens. The segment is going slowly.
Call was addressed by Mr. M P Taparia MD.Key highlights by Capital Mkt
There was a volume growth of 8% to 94044 MT and value growth of 4% to Rs 1205 crore for the quarter ended Juneā15 on YoY basis. For full year ended Juneā15, the volume growth stood at 10% to 275463 MT and value growth stood at 7% at Rs 3918 crore.Sale of value added products stood at 34.20% Vs 32.30% on YoY basis.The company has total installed capacity of 454000 MT of polymers and 2 green field capacity will be operational in next 12 months, thus an addition of 50000 MT will take place to existing capacity, bringing overall capacity to around 500000 MT.
In piping business, while Agriculture was badly affected, housing continued to do well. Housing accounts for about 65% of piping business and 35% came from agriculture in overall piping business.Of the total OPM of about 19.1%, about 4.5-5% was purely due to inventory gain. Overall, as guided earlier,
sustainable OPM is around 14%.CPVC pipes continue to do well and have grown by about 15%.Subsidy is coming down every year and will affect the margins by about 0.3%.
In Supreme Petro, about 50% of profits in the Q4 FYā15, was as a result of inventory gain. However given the turn in the cycle of Polystyrene, management expects the OPM of around 7% to remain going forward.India produced about 257000 tons of polystyrene in FYā13, which came down to 224000 tons in FYā14 and inched up slightly to around 241000 tons in FYā15. Management expects PS to once again go to around 257000 tons in FYā16. Expandable PS is expected to go from about 34000 tons to 36000 tons. Specialty plastic compounds to grow around 20% on low base. Overall volume growth of Supreme Petro to be around 10-12% in FYā16.
Average borrowing of the company stood at Rs 219 crore at average rate of around 8.75% p.a.
Management expects debt to come down further.The entire capex of about Rs 200 crore, will be met through internal accrualsThe company still has about 60000 sq feet of constructed area remaining to be sold which will be undertaken during coming years.Management expects the prices of polymer to remain in narrow range and there will not be much volatility in coming 12 months period ended Juneā16.The company also has proposed to change the financial year to March and thus next year will be a period of 9 months for the company ended March 2016.Plastic piping business value wise grew by around 3% and 9% in volume terms during the year ended Juneā15. The segment reported an OPM of around 13.35% for 12 months ended Juneā15.Packaging products value wise grew by around 13% and 14% in volume terms during the year ended Juneā15. The segment reported an OPM of around 18.54% for 12 months ended Juneā15.Industrial segment value wise grew by around 8% and 11% in volume terms during the year ended Juneā15. The segment reported an OPM of around 12.10% for 12 months ended Juneā15.
Consumer segment value wise grew by around 7% and 5% in volume terms during the year ended Juneā15. The segment reported an OPM of around 14.76% for 12 months ended Juneā15.Composite Cylinder enquiry is at all time high, however it will take some more time before actual conversion happens. The segment is going slowly.
Key highlights of AGM by Capital Mkt
Despite challenges and severe volatility, Supreme Industries recorded a volume growth stood at 10% to 275463 MT and value growth stood at 7% at Rs 3918 crore for full year ended Juneā15. Diverse revenue model with large product portfolio across 5 business verticals namely, Plastic piping, consumer products, packaging products, industrial products and composite products, also helped in sailing through the tough times.The company has total installed capacity of around 4.5 lakh MT with 2 green field capacities coming up by Octā15, which will lead to a total of 5 lakh MT of installed capacity.
Domestic piping market is expected to be around Rs 22500 crore and about 70% is organized market. The organized share is growing faster and tapping more market share from unorganized players. The company has a 14% market share in the organized domestic plastic piping market in India.Consumer products business market is expected to be around Rs 2900 crore with Supremeās share of around 9.8%. The company is a one stop solution of entire range of furnitureās made from polymers.The company has a 15% market share in industrial products segment which is about Rs 1600 crore market in India.
Poly vinyl chloride resin, polyethylene, and polypropylene are the major raw materials for the company, which are crude derivatives. These raw materials are volatile and thus the margins of the company fluctuate every quarter due to inventory positions. As per the management, sustainable margin on a 1ong term basis is around 14% for the company. In Supreme Petro, OPM of around 7% is a sustainable margin for the company going forward.Management expects the volatility of raw material prices to come down from Decā15 quarter onwards, as in this volatile environment, neither the buyer nor the seller gets benefit. Going forward management expects things should remain range bound for some time, which will be good for the whole industry.The company is also the largest supplier to the soft drink industry.
Sale of value added products stood at 34.20% Vs 32.30% on YoY basis.Of the total saleable area of 2.8 lakh sq. feet of Andheri Commercial complex project, about 2.1 lakh sq. feet area is already sold and the balance area of about 0.7 lakh sq. feet is expected to be sold in next 12 months at price of around Rs 125 crore.The company also has proposed to change the financial year to March and thus next year will be a period of 9 months for the company ended March 2016.Overall, company expects to grow in double digit in volume terms for 9 months ended Marā16, however itās difficult to gauge a picture on value wise. Long term target in next 4-5 years is to reach a turnover of around Rs 8500 crore by say 2020.
I am invested in supreme industries since last 2 years and I feel supreme has one of the most transparent management and buying of cartica capital has further spiked up my confidence in Supreme. Will continue to hold.
Will echo your statement completely - add to Cartica I guess holding for last 5 yrs by Nalanda Capital is a big positive
The management of this company draws a lot of similarity with Nebraska Furniture which warren buffet had bought.
The management quality is fantastic. I have been owning and holding this company for around 10 years now. What is interesting is the way they have been able to move away consistently from low margin, low ROE businesses. But one has to be vigilant in terms of the future. The scope for improving margins is more limited now. Their ability to grow profits at 25%+ for the next 5 years is not very certain, at least to me. The composite cylinder business area is an interesting one and may surprise on the upside. Otherwise, this is likely to to have muted growth for the next few years (10-12% revenue), before actual GDP growth kicks in. PE re-rating options are limited, in my opinion.
Call was addressed by Mr. M P Taparia MD-Key highlights by Capital Mkt
There was a volume growth of 16.5% to 57226 MT and value growth of 5.6% to Rs 755.21 crore for the quarter ended Sepā15 on YoY basis.Sale of value added products stood at 32.31% Vs 29.18% on YoY basis.Plastic piping business value wise grew by around 14% and 26% in volume terms during the Sepā15 quarter. The segment reported an OPM of around 13.5% for Sepā15 quarter as compared to 12.6% for Sepā14 quarter.
Packaging products value wise de-grew by around 0.6% and grew volume wise about 4% in during the Sepā15 quarter on YoY basis. The segment reported an OPM of around 15.5% for Sepā15 quarter as compared to 13.1% for Sepā14 quarter.
Industrial segment value wise de-grew by around 12% and de-grew by 1.9% in volume terms during the Sepā15 quarter on YoY basis. The segment reported an OPM of around 9.7% for Sepā15 quarter as compared to 9.3% for Sepā14 quarter.
Consumer segment value wise grew by around 14% and 10% in volume terms during the Sepā15 quarter. The segment reported an OPM of around 11.2% for Sepā15 quarter as compared to 7.8% for Sepā14 quarter.The company expects to incur a capex of about Rs 200 crore for 9 months ended FYā16. Management expects commercial production of new units to Kharagpur and Malanpur to commence from Novā15 onwards. Entire capex will be through internal accruals.The prices of raw material moved downwards during Sepā15 quarter. Management expects overall raw material prices to remain in range bound fluctuations and affordable.The company has received its first export order of US $ 55000 of CPVC fire sprinkler system in Sepā15 quarter.Also, the company expects to supply about 5000 pieces of Composite LPG cylinders to South Korea in Decā15 quarter and expects tender from Government refineries for their requirement of about 8000-12000 pieces of composite cylinders in Decā15 quarter.Average debt stands at around Rs 350 crore as compared to around Rs 500 crore on YoY basis. An average cost of borrowing is about 8.9%.
The company holds about 63800 sq feet of saleable are of supreme chambers and will sell at appropriate prices.Subsidy for Sepā15 stood at Rs 1.29 crore as compared to around Rs 6 crore in Sepā14 quarter.CPVC volumes and value stood at 2712 MT and Rs 75 crore for Sepā15 quarter as compared to 2054 MT and Rs 55 crore for Sepā14 quarter.Piping Industry growth was around 12-13% as compared to 26% growth in piping business for the company. Most of the growth in piping came from housing.More sale of value added product has resulted in higher realization in consumer product segment.
Agriculture was better in Oct 2015 on YoY basis and demand should be better in H2 FYā16 for piping segment.Material handling division has grown in volume terms by 7%. Industrial segment volumes were lower by 6% and were lower by14% in value terms due to tough times of industries. Both automotive and non-automotive segment have suffered in Sepā15 quarter.
The company expects to achieve volume growth of around 15-18% for 9 months ended March 2016. Management expects about Rs 3200 crore to Rs 3300 crore turnover for 9 months ended Marā16, unless there is a major movement in raw material prices. OPM is expected to remain around 13.5% for 9 months ended Marā16.
CONFERENCE CALL - from Capital Markets
Supreme Industries
Expects to achieve volume growth of around 12-15% for 9 months ended March 2016.
The company held its conference call on 25th January 2016 and was addressed by Mr. M P Taparia MD
Key highlights
There was a volume growth of 5% to 76613 MT and value growth of 2% to Rs 989.48 crore for the quarter ended Decā15 on YoY basis.
Sale of value added products stood at 42.38% Vs 38.20% on YoY basis. The main reason for an increase in margins is the increase in contribution from the value added products. Management expects the value added products sale to continue to remain robust.
The prices of raw material continued its downward trend during Decā15 quarter as well. Management expects overall raw material prices to remain in range bound fluctuations and affordable.
The company expects to incur a capex of about Rs 200 crore for 9 months ended March ā16. The commercial production of new units to Kharagpur and Malanpur have commenced and shall achieve normalcy in Jan-Marā16 quarter.
Plastic piping business value wise was more or flat on YoY basis and grew by 4% in volume terms for Decā15 quarter. The segment reported an OPM of around 13.0% for Decā15 quarter.
Packaging products grew by around 13% both value and volume wise during the Decā15 quarter on YoY basis. The segment reported an OPM of around 21.2% for Decā15 quarter.
Industrial segment value wise de-grew by around 21% and de-grew by 12% in volume terms during the Decā15 quarter on YoY basis. The segment reported an OPM of around 11% for Decā15 quarter.
Consumer segment value wise grew by around 12% and 21% in volume terms during the Decā15 quarter. The segment reported an OPM of around 16.3% for Decā15 quarter as compared to 7.8% for Sepā14 quarter.
Loans stood at Rs 449 crore as on Decā15 as compared to Rs 712 crore on Decā14 with average rate of borrowing stood at 8.7%.
CPVC volumes and value stood at 3064 MT and Rs 86 crore for Decā15 quarter
Subsidy for Decā15 stood at Rs 1.7 crore as compared to around Rs 3 crore for H1 ended Decā15.
The company expects to achieve volume growth of around 12-15% for 9 months ended March 2016.
Management is still not positive about industrial segment and expects some de-growth also in Marā16 quarter. Except industrial component all other segments will grow in double digits in Marā16 quarter.
Industry component and Material handling systems which form a part of industrial segment, continued to remain under pressure. Not much traction is happening on either of these sub segments and as per the management, it will take some more time, before the segment improves. Soft drink segment is growing quite slow.
The outlook for FYā17 will be revealed in more detail in Aprilā16 but the management continues to remain optimistic about the future and increase of sale of value added products.
CONFERENCE CALL - from Capital Markets
Expects to achieve volume growth of around 12-15% for 12 months ended Marā17
The company held its conference call on 21st April 2016 and was addressed by Mr. M P Taparia MD
There was a volume growth of 18% to 101467 MT during Marā16 quarter on YoY basis. The volume growth for 9 months ended Marā16 on YoY basis stood at 13%.
Sale of value added products for 9 months ended Marā16 stood at 36.7% Vs 34% on YoY basis. The main reason for an increase in margins is the increase in contribution from the value added products. Management expects the value added products sale to continue to remain robust.
Plastic piping business value wise grew by 14% on YoY basis and grew by 19% in volume terms for 9 months ended Marā16. The segment reported an OPM of around 14.2% for 9 months ended Marā16 as compared to 11.1% for 9 months ended Marā15.
Packaging products grew by 6% on YoY basis and grew by 7% in volume terms for 9 months ended Marā16. The segment reported an OPM of around 21.5% for 9 months ended Marā16 as compared to 14.8% for 9 months ended Marā15.
Industrial segment value wise de-grew by around 16% and de-grew by 8% in volume terms for 9 months ended Marā16 on YoY basis. The segment reported an OPM of around 12.3% for 9 months ended Marā16 as compared to 10.9% for 9 months ended Marā15.
Consumer segment value wise grew by around 14% and 16% in volume terms during the 9 months ended Marā16 on YoY basis. The segment reported an OPM of around 16.8% for 9 months ended Marā16 as compared to 11.9% for 9 months ended Marā15.
Rs 234 crore capex has been incurred by the company in 9 months ended Marā16. The company expects to incur a capex of about Rs 250 crore for 12 months period ended Marā17. This includes 20000 tons annual capacity of PVC pipes at Jalgaon and new extrusion lines for PVC pipes and PE pipes at Kharagpur, land for performance packaging films, energy efficient machines in plastic piping and furniture division, new range of product offerings in plastic piping systems, furniture products, material handling products, roto moulded products and bathroom fittings, to invest in balancing equipments and automation at all plants and to increase the capacities of protective packaging products at Malanpur and Hosur and to add varieties of other products.
As per the management, the company has no plans for any borrowings and is confident enough to meet its capex requirement of around Rs 250 crore from internal accruals and sale of property. The company aims to be a debt free company in next couple of years.
Total borrowing stood at Rs 412 crore as on Marā16 as compared Rs 691 crore for same period last year. Average cost of borrowing is 8.78% Vs 8.85% for 9 months ended Marā15.
Polymer prices continued to remain lower for entire period of FY 2016, lower cost of raw material at opening of Janā16 helped in higher margins apart from increase in sale of value added products.
Management expects around 12-15% volume growth for 12 months period ended Marā17. Several new varieties of products including exports will drive growth. Management expects volume growth in all segments except industrial side.
14-14.5% is the average margin for the company, but raw material prices, inventory levels and any further increase in sale of value added products can affect the margins.
For Supreme Petro, the year ended Marā16 saw a year of combination of both value and volume growth. The volume growth of 12-15% was never seen in past decade. Lower levels of inventory and then the spurt in demand due to higher applications, together with higher exports particularly to EU is driving the growth for the company. Management expects another strong FYā17 year for Supreme Petro, wherein volume growth is expected to remain around 12-15%.
Demand for Packaging and Piping continue to remain strong from housing, agriculture, drinking water and storage demand from state government etc. While auto demand is also strong and the company is adding new customers. Industrial side demand outlook remains uncertain.
CPVC volumes for Marā16 quarter stood at 4138 MT and revenue was Rs 114 crore as compared to 2847 MT and Rs 79 crore for 3 months ended Marā15 quarter. For 9 months ended Marā16, CPVC volumes stood at 9914 MT with sales of Rs 275 crore as compared to 7995 MT and Rs 216 crore respectively for same period last year.
The company in CPVC segment has grown faster than the market. Both Astral and Supreme are in Plumbing side of CPVC. Astral has also entered on the industrial component side of CPVC and Supreme will also follow the same.
AGM - from Capital Markets
During FYā17, company plans to go global for its furniture business
The company held its AGM on 28th Juneā16 and was addressed by Mr. Taporia MD
Demand for packaging and piping continues to remain strong from agriculture, housing, storage, drinking water segments. Management expects the industrial product segment to show good traction compared to last year. Already enquiries are high and execution is also happening in some industries.
Around 200 new varieties of plastic pipes and fittings will be launched in FYā17. Water tanks and Septic tanks will be produced in a monthās time. Other material handling and piping products will also be launched very soon.
During FYā17, company plans to go global for its furniture business. It will participate in global exhibitions and fares and expects good exports in FYā17. The company will introduce new products in furniture category of business and a green field manufacturing unit in West Bengal will commence its operations in Sepā16 quarter to manufacture these new products.
Monsoon has picked up well in the 2nd half of Juneā16 and will help in gaining confidence for the rural economy. Management expects good demand from rural and agri segment in FYā17.
The company had incurred a capex of around Rs 235 crore during last year and plans to spend around R 250 crore in FYā17.
As per the management, there is a further scope for increase in the value added product sales which is currently around 36.7% of total sales.
Management expects its borrowings to go down further from around Rs 400 crore as on Marā16 to around Rs 300 crore by Marā17. Any sale proceeds from the sale of around 64000 sq feet ready construction area will be bonus.
Management continues to remain optimistic about a volume growth of around 12-15% in FYā17. New products, higher exports, higher sale of value added products and newer geographies will drive the volume growth. There will be quarterly variance but overall, the company will be able to achieve the volume growth.
Management expects quarterly variation to get reduced going forward and expects more or less even quarters going forward gradually.
For Supreme Petro, management expects another strong year with a double digit volume growth largely due to strong demand and lower inventory levels across the industry.
Implementation of GST will lead to some benefits in form of higher sale of value added products. The company is already in process of increasing its higher value added product sale and GST will help in the process.
Highlights of Q1 2017 Concall (Capital market)
There was a volume growth of 3% to 97045 MT during Juneā16 quarter on YoY basis.
Sale of value added products for 3 months ended Juneā16 stood at 34.98% Vs 34.74% on YoY basis. Management expects the value added products sale to continue to remain robust.
Plastic piping business value wise de-grew by 2.4% on YoY basis and grew by 6% in volume terms for quarter ended Juneā16. The segment reported an OPM of around 15.9% as compared to 17.9% for quarter ended Juneā15.
Packaging products de-grew by 11% on YoY basis in volume terms while value growth was lower by 6% for the quarter ended Juneā16. The segment reported an OPM of around 23.16% as compared to 27.4%.
Demand for Packaging and Piping will improve from housing, agriculture, drinking water and storage demand from state government etc. While auto demand is also strong and the company is adding new customers.
Industrial segment value wise de-grew by around 1 % while volume terms also the segment de-grew by 1% for Juneā16 quarter on YoY basis. The segment reported an OPM of around 12.1% as compared to 15.8%. Industrial segment is slowly showing good growth and management expects the segment to improve every quarter in FYā17.
Consumer segment volume wise grew by around 2% for Juneā16 quarter while value wise growth was lower by 2% on YoY basis.
Net borrowing for the company as on Juneā16 stood at Rs 306 crore Vs Rs 410 crore as on Marā16. The company expects to reduce debt by further Rs 100 crore during the year ended Marā17.
CPVC volumes for Juneā16 quarter stood at 2959 MT and revenue was Rs 84 crore. The CPVC volumes saw a de growth of 6% on industry wise in Juneā16 quarter. There was a huge surge in imports for CPVC segment in Juneā16 quarter. Construction was weak in Juneā16 quarter also resulted in some lower off take for CPVC segment across the industry.
Overall, CPVC industry will be around Rs 3000 crore and company has market share of around 14%.
The Juneā16 quarter was a transitional quarter. The company used to give targets to its 2700 distributors every year which ended on June. This time, the entire scenario has changed and results will improve upon every quarter. So, Sepā16 quarter will be significantly higher than Sepā15 quarter and management expects the loss of revenues in Juneā16 quarter, to compensate going forward in coming quarters particularly in Marā17 quarter.
Juneā15 quarter had more than 19% margin due to inventory gain and being the last quarter of every year, most of the growth for the year ended Juneā15 happened in Juneā15 quarter. As per the management, one of the reasons why the YoY comparable numbers are not mentioned is due to seasonality and related issues. Gradually as the year move on, more clarity will emerge on quarterly numbers. Thus FYā17 has to be a transitional year, with Juneā16 quarter being more transitional due to seasonality of business.
Thus, management continues to expect strong volume growth of around 12-15% for 12 months ended Marā17. Along with 12-15% volume growth there can be a realization growth of around 1%. Margins will be around 14.5-15% for FYā17. Lower raw material prices and increase in share of value added products will lead to better margins going forward.
Polymer prices continued to remain lower for entire period of FY 2016 and even in the current quarter, raw material prices have not increased much even though there was some increasing trend seen on QoQ basis.
Rs 234 crore capex has been incurred by the company in 9 months ended Mar.'16. The company expects to incur a capex of about Rs 250 crore for 12 months period ended Mar.'17. This includes 20000 tons annual capacity of PVC pipes at Jalgaon and new extrusion lines for PVC pipes and PE pipes at Kharagpur, land for performance packaging films, energy efficient machines in plastic piping and furniture division, new range of product offerings in plastic piping systems, furniture products, material handling products, roto moulded products and bathroom fittings, to invest in balancing equipments and automation at all plants and to increase the capacities of protective packaging products at Malanpur and Hosur and to add varieties of other products.
