Supreme Petro CMP 746:
Supreme Petrochem is engaged in the business of Styrenics and manufactures Polystyrene (PS), Expandable Polystyrene (EPS), Masterbatches and Compounds of Styrenics and other Polymers, Extruded Polystyrene Insulation Board (XPS) Styrene Methyl Methacrylate (SMMA).
SPL is India’s largest producer of PS products. The annual installed capacity of PS, EPS, specialty polymers and compounds and extruded PS is 2,72,000MT, 72,100MT, 33,500MT and 5,000MT, respectively.
Financial
- ROE and ROCE is around 55% and 72% respectively. (Excellent)
- P/BV - 5.9x,, Face Value: INR 10.
- Forward PE - 15 which is average as per Industry benchmark.
- Q4FY21 topline was around INR 1,269 Cr Vs. 663 Cr in YoY Vs. 930 Cr in QoQ. Therfore up by 91% in YoY and 36% in YoY.
- FY21 topline: INR 3,185 Cr Vs. 2,724 Cr in FY20 up by 16.9% in YoY.
- Q4FY21 bottomline was around INR 232 Cr Vs. 24 Cr in YoY Vs. 172 Cr in QoQ therefore up by 866% in YoY and 35% in QoQ.
- FY21 bottomline was around INR 477 Cr Vs. 103 Cr in YoY therefore up by 363% in YoY.
- Debt free company.
- Operating profit margin is around 21% in FY21 which is highest in all the past years.
- Operating cash flow is also excellent and it was 435 Cr Vs. 120 Cr in YoY.
- Promoter holding is around 64% which is strong and stable and increased by more than 1.5% in last 1 year, FIIs and DIIs hold around 1.2% and 2.1% respectively.
Opportunities
- SPL is benefitting in the domestic market from the shutdown of the LG Polymers India Ltd's (second largest polystyrene (PS) manufacturer in India; accounting for close to 25% of India's PS capacity) facility post a styrene vapour leakage incident at its Vizag plant in May 2020. According to SPL’s management, in the absence of any planned capacity addition from the competitors, the demand-supply scenario has structurally improved in the domestic PS industry. To meet the supply gap created by LG Polymers' capacity shutdown, SPL is undertaking brownfield expansion for its PS capacity by 80,000MT and expandable polystyrene (EPS) capacity by 30,000MT.
- Strong EBITDA depsite Q1 was disturbed on account of lockdown.
- SPL plans to enter the mass acrylonitrile butadiene styrene (ABS) market, with an initial capacity of around 60,000tpa to 80,000tpa by setting up a new line at the existing plant over FY22-FY24. Improved PS capacity is likely to reduce the revenue share of VAP over the near term.
- The company continues to hold a leading position in the domestic PS (about 44% share of domestic supply including LG Polymers' capacity) and EPS markets. The company’s strong market position and large scale are likely to improve further with the completion of PS expansion project. It is the only domestic manufacturer of extruded PS foam board and styrene methyl methacrylate.
- Long term operating track record.
- Dividend is increasing trend and after strong performance company has paid around INR 12.5 per share as an dividend.
- Company has reserve of around 970 Crs.
Concern
- Volatility in polypropylene caps margin and volatility of SM prices also.
- Last 5 year topline growth was in single digit.
View Share high 820 and now 740. Share can considered a good investment in longer run any correction in price will give good opportunity to enter. Short term support 675 Target can be 900.
Views are shared just for educational purpose and personal in nature others can take different view/opinion.