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Supreme Ind.: Good overall performance - Views on News from Equitymaster

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Supreme Ind.: Good overall performance

Oct 31, 2012

Supreme Industries declared the results for the first quarter of financial year 2012-2013 (1QFY13). The company reported 23.2% YoY growth in sales and 19.7% YoY growth in net profits during the quarter. Here is our analysis of the result.

Performance summary
  • Net sales were up by 23.2% YoY during the first quarter of financial year 2012-2013.
  • Operating profits increase by 19.3% YoY during the quarter.
  • Supreme Industries was able to control interest expenditure which was lower by 14% YoY.
  • The company's consolidated net profit was up by 19.7% YoY and net profit margins were stable at 6.3%.

Financial performance snapshot
(Rs m) 1QFY12 1QFY13 Change
Net sales 5,012 6,176 23.2%
Expenditure 4,301 5,329 23.9%
Operating profit (EBDITA) 711 848 19.3%
EBDITA margin (%) 14.2% 13.7%  
Other income 9 1 -94.3%
Interest 133 115 -14.0%
Depreciation & amortisation 172 186 8.3%
Profit before tax 416 548 31.9%
Tax 138 178 29.1%
Profit after tax before minority 278 371 33.2%
Share of associates (47) (19)  
Profit after tax 325 390 19.7%
Net profit margin (%) 6.5% 6.3%  
No. of shares (m)     127.0
Diluted earnings per share (Rs)*     19.5
P/E (x)     14.9
(*trailing twelve month earnings)

What has driven performance in 1QFY13?
  • Net sales were up by 23.2% YoY during the first quarter of financial year 2012-2013. Segment wise, plastic piping grew by 50% YoY, packaging by 14% YoY, industrial products by 21% YoY and consumer products by 7% YoY.

  • Raw material costs increased by 30.7% YoY, staff costs by 11.3% YoY and other expenses by 21.2% YoY resulting in operating expenses going up by 23.9% YoY.

  • Operating profits were higher by 19.3% YoY and operating profit margins declined slightly by 0.5%.

  • Supreme Industries was able to control interest expenditure which was lower by 14% YoY.

  • The company’s consolidated net profit was up by 19.7% YoY and net profit margins were stable at 6.3%

    Cost breakup
    (% of sales) 1QFY12 1QFY13 Change
    Increase / Decrease in stock in trade -540 -862 59.6%
    Raw materials consumed 3661 4,785 30.7%
    Staff cost 251 280 11.3%
    Other expenses 929 1,125 21.2%
    Total expeneses 4,301 5,329 23.9%

What to expect?
Supreme Industries is in an expansion mode and all its plans have been progressing well. Although the high raw material prices continued to be a concern, the company has been able to pass on the price hikes to its customers thereby protecting profitability. All the segments of the company are witnessing growing demand from customers. This is the reason behind rapid expansion of capacities which will start yielding results soon once these additional capacities come into production. Also, the company has been looking at newer businesses especially in composite segment namely pipes and cylinders. The company foresees huge demand for these products in the market. At the current price of Rs 290, the stock is trading at a multiple of 15 times its trailing twelve month earnings. We had recently given a buy recommendation on the stock and we maintain our view.

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