Supreme Industries - Inventory Loss Pain; Outlook Optimistic; Result Update Q2FY15 :: Edelweiss

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->

Supreme Industries’ (SIL) Q2FY15 (June year end) sales and PAT of INR10.2bn and INR0.35bn belied our INR10.8bn and INR0.63bn estimates, respectively. The disappointment was owing to lower-than-expected volumes, inventory loss and higher interest cost. Key positives were: (1) all segments performed well; (2) industrial and consumer businesses grew 17.9% and 13.8% YoY, respectively; (3) overall volume up 10%; and (4) composite cylinder and bathroom fittings business on track. Inventory loss of INR0.5bn on account of declining raw material prices was key negative. However, lower raw material cost is good for business in terms of lower cost and working capital. Considering the challenging business environment in H1FY15, SIL trimmed FY15 revenue growth guidance to 8-10% (from 18-20%) with EBITDA margin of 12.5-13.0% (from 13.5-14.0%). Management envisages robust industry growth during FY15. We believe, focus on branded business bolstered by consistent product innovations and capacity expansion across segments will fuel SIL’s growth going ahead. We anticipate it to be key beneficiary of improvement in domestic macros.

Industrial, consumer segments spur growth

Net sales grew 9.0% YoY, primarily on account of 17.9% and 13.8% surge in revenues of industrial and consumer segments, respectively. Overall volumes jumped 10% YoY led by piping (12.5%), industrial (12.8%) and packaging (5.9%). Consumer segment volume dipped 6.4% YoY owing to SIL’s focus on specialty furniture. EBITDA margin plummeted 340bps YoY to 9.9% (estimate 14.4%) on account of inventory loss of INR0.50bn due to correction in raw material prices. Adjusted for this, EBITDA margin stood at 14.8%.  PAT fell 32.4% YoY to INR0.35bn.

LINK
https://www.edelweiss.in/research/Supreme-Industries--Inventory-Loss-Pain;-Outlook-Optimistic;-Result-Update-Q2FY15/28099.html