Supreme Industries targets pipe demand recovery through capex and rural market expansion
Supreme Industries Ltd.
BUY
₹3,395
₹3,600
₹4,100
20.77%
Investment View and Valuation
Anand Rathi Research retained its BUY rating on Supreme Industries following its July 29, 2026 result update, despite a mixed Q1FY27 performance. The broker expects the company to gain share in plastic pipes through aggressive capacity expansion, a wider product basket and deeper rural penetration.
Anand Rathi expects EPS to grow at a 24.2 per cent CAGR over FY26-FY28E, with RoIC of about 30 per cent over FY27E-FY28E. The target price was reduced to Rs4,100 from Rs4,700 as the valuation multiple was cut to 35x FY28E EPS from 40x. This reduction was partly offset by a 5 per cent increase in the FY27E EPS estimate, while the FY28E EPS estimate was broadly retained.
| Particular | Details |
|---|---|
| Recommendation | BUY |
| Target price | Rs4,100 |
| Target price revision | Reduced from Rs4,700 |
| Valuation multiple | 35x FY28E EPS, reduced from 40x |
| Expected EPS growth | 24.2 per cent CAGR over FY26-FY28E |
| Expected RoIC | About 30 per cent over FY27E-FY28E |
Q1FY27 Financial Performance
Supreme Industries reported consolidated Q1FY27 revenue of Rs2,718 crore, up 4.2 per cent year on year but 14.8 per cent below Anand Rathi's estimate. The shortfall reflected a 14.3 per cent decline in sales volume amid heavy channel destocking.
EBITDA increased 24.8 per cent year on year to Rs398 crore, broadly in line with the broker's estimate of Rs407 crore. EBITDA margin expanded by 242 basis points year on year to 14.6 per cent, ahead of the 12.8 per cent estimate, supported by stronger pipe margins and a lower share of low-margin agri and infrastructure pipes.
Adjusted PAT rose 38.8 per cent year on year to Rs281 crore, beating the broker's estimate by 20.1 per cent. The main contributor was Supreme Petrochem's share of profit, which increased to Rs73 crore from Rs52 crore in Q4FY26. Net cash stood at Rs540 crore at June 2026, compared with Rs650 crore at March 2026.
| Q1FY27 metric | Reported | Year-on-year change | Broker comparison |
|---|---|---|---|
| Consolidated revenue | Rs2,718 crore | Up 4.2 per cent | 14.8 per cent below estimate |
| Sales volume | — | Down 14.3 per cent | Impacted by channel destocking |
| EBITDA | Rs398 crore | Up 24.8 per cent | Against Rs407 crore estimate |
| EBITDA margin | 14.6 per cent | Up 242 basis points | Against 12.8 per cent estimate |
| Adjusted PAT | Rs281 crore | Up 38.8 per cent | 20.1 per cent above estimate |
Segment Performance
The pipes segment was the principal weakness in Q1FY27, with volume declining 15.4 per cent year on year to 125.8 KTPA. The agri segment was most affected by the sharp correction in polymer prices. However, pipe EBIT margin increased by 265 basis points to 11.4 per cent because of a more favourable sales mix.
Non-pipe volume declined 9.5 per cent, while non-pipe EBIT margin remained broadly stable at 9.7 per cent. Packaging revenue grew 9.1 per cent despite a 9.6 per cent volume decline, and its EBIT margin improved by 107 basis points to 12.5 per cent. Industrial products revenue increased 23.8 per cent on a better mix, despite a 5.8 per cent volume decline.
Consumer products revenue declined 11.2 per cent, with volume down 22.2 per cent and EBIT margin down 275 basis points to 11.3 per cent. Value-added products accounted for 42.5 per cent of Q1FY27 revenue, compared with 36 per cent in Q1FY26.
| Segment | Revenue / volume trend | Margin trend |
|---|---|---|
| Pipes | Volume down 15.4 per cent to 125.8 KTPA | EBIT margin up 265 basis points to 11.4 per cent |
| Non-pipe | Volume down 9.5 per cent | EBIT margin broadly stable at 9.7 per cent |
| Packaging | Revenue up 9.1 per cent; volume down 9.6 per cent | EBIT margin up 107 basis points to 12.5 per cent |
| Industrial products | Revenue up 23.8 per cent; volume down 5.8 per cent | Improved on a better mix |
| Consumer products | Revenue down 11.2 per cent; volume down 22.2 per cent | EBIT margin down 275 basis points to 11.3 per cent |
Demand Recovery and FY27 Guidance
Management said underlying demand remains intact and cited a strong demand recovery in July 2026 as polymer prices rose following the minimum import price on PVC. Depleted channel inventory has started to be replenished, supporting expectations of a recovery in pipe volumes during Q2FY27.
Management reiterated its FY27E guidance for overall volume growth of 12-13 per cent, including 15-17 per cent growth for pipes, and an EBITDA margin of 14-14.5 per cent. The strategy is to prioritise market-share gains rather than maximum margins, using economies of scale and its pan-India manufacturing presence to offer competitive pricing. Management expects positive pipe-volume growth in H1FY27, supported by a recovery in Q2FY27.
Capex, Capacity and Growth Initiatives
Supreme Industries committed Rs500 crore of capex in Q1FY27 against planned FY27 capex of Rs1,000 crore. The programme is being funded through internal accruals. New facilities are being established in Bihar, Jammu and Malanpur, while the company is adding land in Pondicherry for export furniture manufacturing and in Erode.
Wavin capacity utilisation was 50-60 per cent in Q1FY27, and management is targeting 70 per cent utilisation of its 70,000-tonne annual capacity in FY27. The company is also targeting Rs600 crore of gas-piping business in FY27, sees potential in UPVC windows and doors, and plans to increase exports from US$26 million in FY26 to US$150 million over six to seven years.
Key Risks
- A slower-than-expected recovery in real estate.
- Loss of market share in plastic pipes.
- A sharp correction in polymer prices.
Disclaimer: This is a summary of a research report published by the broker/research house identified above. The views, recommendations, target prices and estimates are those of the respective broker and do not represent DSIJ investment advice. The summary may be AI-assisted, hence please refer to the original report for complete details, disclosures and risks.
