Supreme Petrochem Ltd. share price target

Supreme Petrochem reported better-than-expected top-line growth compared to our estimates due to an increase in price realization. However, profitability was in-line with our estimate with stable pricing in key raw material Styrene Monomer.

Supreme Petrochem’s revenue beat our estimates (+10.8%) due to strong volume growth and stable price realization. The EBITDA beat our estimate (+12.9%) due to better-than-expected revenue growth and lower than expected employee expenses.

We recently met with the management of Supreme Petrochem. Following were the Key-Take-Away:
Revenue outlook
• The pricing of finished products is influenced by changes in raw material costs. Due to a decline in raw material prices in FY24, the price realization has subsequently decreased.
• The price of key raw material is anticipated to be stable in the future. Therefore, price realization will support the top-line growth going forward.

Supreme Petrochem met our estimates on revenue, EBITDA, and PAT for Q4FY24. Revenue beat was due to strong volume growth, EBITDA beat was due to lower-than-expected other expenses and net profit beat was due to better-than-expected operational performance and lower-than-expected tax expenses.

For Q3FY24, Supreme Petrochem reported revenue of INR 11,877 Mn which grew 0.6% YoY but declined 7.0% QoQ. The subdued growth reflected the weakness in exports to USA and Europe, including Turkey, which were adversely impacted due to the danger of potential attacks on commercial ships in the Red Sea.

For Q2FY24, Supreme Petrochem’s revenue grew by 3.5% YoY and 4.3% QoQ to INR 12,777 Mn, due to increase in domestic sales volume of 22.7% YoY and 3.9% QoQ while total volume increased by 62.6% YoY and 12.7% QoQ. In H1FY24, the revenue declined by 7.9% YoY to INR 25,028 Mn but the total volume for H1FY24 grew by 17.6% YoY to 1,58,000 MT.

In Q1FY24, SPL revenue from operation stood at INR 12,251 Mn, which de-grew by 11.7% QoQ and declined by 17.5% YoY. The decline in revenue is mainly attributable to correction in the price of Styrene Monomer which is the primary raw material. The correction in raw material prices led to destocking of inventory at the industry level and resulting into a dip in production volumes.

In Q4FY23, Supreme Petrochem Ltd (SPL) revenue from operation stood at INR 13,869mn, grew by 17.5% QoQ and declined by 7.5% YoY. Sequential growth in the revenue is mainly attributable to the 17.8% QoQ growth in the volume; whereas realization was almost stagnant on a sequential basis.

In Q2FY23, Supreme Petrochem's (SPL) revenue from operation stood at INR 11,804mn, declined by 8.9% YoY/4.4% QoQ. Muted revenue performance is mainly attributable to a drop in the volume and lower realization.

Supreme Petrochem’s (SPL) revenues saw muted growth of 3.7% YoY to INR 12,346 mn.

COVID-19 severely affected volumes; fall in domestic volume greater than export volume: The business was impacted due to COVID-19 pandemic and the ensuing lockdown that followed. Domestic volumes shrunk to 38% of the volumes in the corresponding quarter of the previous year. On exports front, the company performed well. Including exports, the company could sell only 53% of the total volumes in the corresponding quarter of the previous year. Company continues to face challenges with regards to labor shortages & restrictions on full fledged operations in some regions. It is currently operating at 70% utilization levels. Gross margin contracts; EBITDA turns negative for the quarter: Gross Profit Margin contracted...

Total revenue for Q2FY18 came in at INR 7074.58 Mn as against our estimates of INR 7747.12 Mn which grew by 12.85% YoY and by 0.13% QoQ. EBIDTA for Q2FY18 stood at INR 614.79 Mn as against our estimates of INR 635.9 mn showing a variation of 3.4% growing by 24.77% YoY and 230.54% QoQ. While EBITDA margins stood at 8.7% up by 83 bps YoY and by 606 bps QoQ mainly due to inventory gains. PAT for Q2FY18 stood at INR 366.78 Mn and PAT margin was at 5.18% in line with our estimations of 5.19% witnessing an...

Supreme Petrochem Limited (SPL) is India's largest producer and global supplier of Polystyrene (PS) which accounts for ~96% of its total revenue. SPL possesses two state of the art production facilities at Amdoshi-Wangani, Maharashtra and Chennai, Tamil Nadu. Apart from the conventional polystyrene, SPL has shifted its focus to discrete innovative products entering into Expandable Polystrene (EPS), EPS 3D panel, Specialty Polymers and Compounds (SPC) and Extruded Polystrene (XPS) that find it's applications in variety of industries ranging from home and electrical appliances, construction, food and non-food packaging industry and so on. Further, we believe that with usage of products like EPS 3D panels and XPS boards being encouraged by the Government in...