During Tuesday’s trading session, the shares of India’s leading Plastics product manufacturing company slumped nearly 10.4 percent to Rs. 4,458.45 on BSE, after the company reported Q2 FY25 financial results with a decline in net profit by 24.3 percent QoQ and 15 percent YoY.
With a market cap of Rs. 56,657.2 crores, at 03:26 p.m., the shares of Supreme Industries Limited were trading in the red at Rs. 4,471, down by nearly 10.2 percent, compared to its previous closing price of Rs. 4,978.1.
What’s the news:
The fluctuations in the share prices were also observed after Supreme Industries Limited announced the financial results for Q2 FY25, through the latest filings with the stock exchanges during the trading session of Tuesday.
For Q2 FY25, Supreme Industries reported consolidated revenue from operations of Rs. 2,273 crores, reflecting a decline of around 14 percent QoQ from Rs. 2,636.4 crores in Q1 FY25, as well as a fall of about 1.6 percent YoY from Rs. 2,309 crores in Q2 FY24.
The company’s net profit for Q2 FY25 fell to Rs. 207 crores, representing a significant decline of around 24.3 percent QoQ from Rs. 273.4 crores in Q1 FY25 and a year-on-year decrease of nearly 15 percent from Rs. 243.2 crores in Q2 FY24.
The Earnings Per Share (EPS) of Supreme Industries decreased to Rs. 16.26 in Q2 FY25, down by 15 percent YoY from Rs. 19.14 in Q2 FY24.
During Q2 FY25, the turnover for value-added products was Rs. 907 crores, a decrease from Rs. 942 crores in the same quarter of the previous year.
As of September 30, the Company reported a total cash surplus of Rs. 674 crores, down from Rs. 1,178 crores on March 31, 2024.
Further, the company’s Board has declared an interim dividend of Rs. 10 per share for FY25 with a face value of Rs. 2 each, and has fixed 30th October as the record date.
Reasons for muted results:
The growth of the Plastic Pipe Systems business was significantly impacted by extreme fluctuations in PVC resin prices, reduced government spending on infrastructure during the first half of the year,
and an extended monsoon season.
Due to the blockage of shipment movements through the Red Sea, container productivity sharply declined, resulting in a significant increase in freight costs from Asian countries to India.
In India, 66 percent of the demand for PVC resin is satisfied through imports, with over 80 percent of those imports originating from Asian countries. This has led to an increase in the cost of PVC resin by 19 percent between mid-April to 30th June.
With the prolonged rainy season, the recovery in demand for agricultural pipes remained weak in September. Additionally, government infrastructure spending decreased during the first half of the fiscal year.
As a result, the Company has adjusted its forecast for volume growth in the Plastic Pipe Systems segment from 25 percent to a range of 16 percent to 18 percent for this year.
Management Guidance:
The company mentioned that the price volatility has eased, and the price trend of PVC is expected to sustain or increase marginally. The business season has commenced, with the monsoon having withdrawn.
Additionally, the government has announced an increase in infrastructure spending for the second half of the financial year.
The company is well-prepared to meet the anticipated rise in demand for its products, supported by enhanced capacity from various ongoing brownfield expansions at multiple sites.
With the completion of all expansion initiatives, the total installed capacity of the Piping System division is projected to reach 8.35 lakh metric tons per annum by the end of FY25.
The business of Cross Laminated Film has begun to show improved performance, driven by increased demand for tarpaulins and expansion into new export markets. The division anticipates approximately 15 percent volume growth in this segment for the year, along with enhanced profitability.
Considering the business outlook and opportunities, the company has made capital expenditure commitments, including carry-forward commitments, totalling around Rs. 1500 crores.
The total cash outflow for the current year is not expected to exceed Rs. 1000 crores and will be fully funded from internal accruals.
Stock Performance:
The stock has delivered positive returns of nearly 3.4 percent in one year, as well as around 5.6 percent returns in the last six months. So far in 2024, the shares of Supreme Industries have given negative returns of about 0.5 percent.
About the company:
Supreme Industries Limited is engaged in offering a wide and comprehensive range of plastic products in India.
The company operates in various product categories viz. plastic piping systems, cross-laminated films & products, protective packaging products, industrial moulded components, moulded furniture, storage & material handling products, performance packaging films and composite LPG cylinders.
Written by Shivani Singh
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