SUPREMEIND - Supreme Industries Ltd. Share Price

Management Outlook and Major Points:

Outlook:

• Plastic Piping Systems: Expect strong demand in Q4 from Agri and Housing segments. Anticipate volume growth 3-4% above industry average, driven by expanded capacity (8.2L MT to 9L MT by FY25) and new product launches (PP silent pipes, PERT systems). Three greenfield plants (Jammu, Bihar, MP) planned for FY26.
• PVC Resin Prices: Uncertainty due to potential anti-dumping duties; domestic prices aligning with import parity. Inventory destocking complete, low prices to spur demand.
• Industrial Components: Moderate demand but optimistic about white goods/appliance sector recovery.
• Cross Laminated Film: 20% volume growth expected; new cross plastic film in trials.
• Furniture Segment: Expanding showrooms (337 by Dec'24) and introducing new models.
• Material Handling: Scaling pallet production across locations; Bubble Guard Board production by Q1 FY26.
• LPG/CNG Cylinders: Fulfilling IOCL orders; CNG cylinder commercialization in Q4 FY25.
• Protective Packaging: Expanding fabrication capacities; new greenfield site planned near western port.

Key Highlights:

• Capex: Rs. 1,500 crore committed (Rs. 718 crore spent in 9M FY25), funded internally.
• Financials: Debt-free with Rs. 290 crore cash surplus. FY25 margin guidance: 13.5"“14%.
• Value-Added Products: Contribution increased to 13% YoY in Q3; targeting higher SKUs (14,234 in piping).
• Challenges: Weak infra spending, delayed govt. projects, and competitive PVC pricing impacting margins.

Management remains focused on capacity expansion, product diversification, and operational efficiency to drive growth despite market volatility.

Question: What is the capacity and ramp-up plan for the window profiling business?
Answer: The initial annual capacity is 5,000 tons. Supreme aims to expand significantly in the 130,000+ ton market, positioning itself as a major player.

Question: How will Supreme achieve 15"“16% annual volume growth in the piping segment after 7.8% growth in nine months?
Answer: Q4 demand is expected to surge due to de-stocking, low prices, and capacity availability. Management is confident in achieving targets if market conditions stabilize.

Question: What is the outlook for PVC prices and demand revival?
Answer: PVC prices are at low levels, with potential anti-dumping duties and local producers adjusting to import parity. Demand is expected to rebound in Q4 due to affordable pricing and improved agri/housing activity.

Question: Why did cash reserves drop from Rs.1,180 crore to Rs.300 crore?
Answer: Capex commitments (Rs.718 crore in nine months, targeting Rs.1,000 crore for FY25) and high inventory levels consumed cash. Inventory liquidation is expected in Q4.

Question: What caused the margin contraction in Q3?
Answer: Lower PVC prices led to inventory losses (over Rs.100 crore in nine months) and competitive pricing pressure. Local resin procurement, despite losses, prioritized supplier relationships.

Question: How is demand across segments (housing, agri, infra)?
Answer: Q3 saw weak agri demand (due to extended rains), moderate housing demand, and stagnant infra spending. Q4 expects agri/housing recovery but infra remains uncertain.

Question: What is the update on OPVC pipes and expansion plans?
Answer: Current OPVC capacity is 9,000 tons/year (3 lines). Plans to scale with 7 additional lines by 2028, targeting 6,000"“7,000 tons in FY26. Focus on replacing ductile iron pipes in smaller diameters.

Question: What is the outlook for CNG composite cylinders?
Answer: CNG cascade cylinders (30-cylinder units) are certified, with commercialization starting in Q4. Anticipated growth aligns with rising CNG adoption in fuel stations.

Question: Why did industrial products segment volume decline?
Answer: Non-recurring orders (e.g., electronic voting machines in FY24) skewed comparisons. Underlying demand in appliances/white goods is moderate but improving.

Question: What is the value-added product growth strategy?
Answer: Value-added products grew to 38% of revenue (from 35%). Investments in piping systems (e.g., PP silent pipes, PERT systems) and furniture (337 showrooms) aim to boost margins and ROCE.

Question: What are Q4 margin expectations?
Answer: FY25 operating margin projected at 13.5"“14%, driven by stable PVC pricing, inventory liquidation, and improved product mix.

Question: How is CPVC performing?
Answer: CPVC volume grew over 20% in nine months, outpacing industry growth (9%). Q4 demand expected to strengthen further with housing momentum.

Question: What is the infra demand outlook?
Answer: Infra remains weak (28% HDPE volume decline in nine months). Limited near-term optimism unless government accelerates FY25 budget spending.

Question: Are channel partners restocking?
Answer: Distributors/retailers are operating with minimal inventory due to price volatility. Supreme is prepared to meet restocking demand in Q4.

Question: What is the gas piping systems order status?
Answer: No orders yet. Supreme is qualified but faces delays as a new entrant. Expects gradual traction in FY25.

Question: What is the capex focus for FY25?
Answer: Rs.1,500 crore capex (including carry-forward) for piping capacity (9 lakh tons by March 2025), windows (Kanpur plant), and protective packaging expansions. Funded via internal accruals.