Supreme Ind
CMP 690/-
· Company is one of the largest plastic processor in India, processing about 1,92,000 MTs of polymers annually. It has comprehensive plastic product portfolio including – Plastic/PVC piping & Fittings [43.59%], Packaging Products [24.11%], Industrial Products [20.48%] and Consumer Products [11.83%].
· With moderation in the input prices and better the consumption of all kind of Pipes, fittings, Crates, micro irrigation and irrigation products will go up. Further as rural purchasing power will go up, demand for Plastic furniture and other household item will go up.
· Newer and newer usages are found for various products by strong R&D of the company, which is continuously developing and innovating products used across segments like – Pipes for potable water/ drainage/ sewerage/ irrigation, Protective packaging, Material handling, molded furniture, Auto & Appliances components, Industrial products, Packaging films and designer products etc.
· Company is spending Rs 275 Crs in capex in current year to expand capacities across product range as well as setting up facilities to manufacture LPG Composite Cylinders, which are light weight and explosion proof. Project will go on stream in Oct.’11.
· Apart from strong cash flows from core business, the big cash flow & profits are expected from recently completed commercial property in Mumbai; which may lead to exceptionally great cash flows for company in current year.
· Even without property gains, company can report EPS of Rs 90 and with these gains [if property is sold out in current FY] additional cash flows could be over Rs 300 Crs. Even excluding property gains, stock is available at attractive P/E of just 7.5X for FY’11.
Looking to almost zero debt status, high ROACE [40%], ROANW [43%], liberal payouts and attractive growth trajectory, the stock should get discounting of at least 12X for FY’11 Est. earnings. So we expect a target price of Rs 1080 cum split and Rs 216/- post split. [As company has announced a Split from Rs 10/- to Rs 2/- FV and record date is due in mid Oct.’10.] BUY
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