ICICI Securities: Supreme Industries -Faster-Than-Expected Recovery Post Covid-19 Led Lockdown; Perfect Recipe For Re-Rating
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ICICI Securities Report
Supreme Industries Ltd.’s re-rating is driven by -
1. faster-than-expected recovery post Covid-19 led lockdown - mere 3.4%/3.7% volume/value decline in July and August 2020 (Source: Chairman’s speech at its recently concluded annual general meeting);
2. higher (double-digit) growth expectations post FY21 in its core segments – plastic piping and Silapulin;
3. likely improvement in asset turns over the next two to three years with huge capex over FY20-FY21 going into the production next year;
4. reducing dependence on commodity-led industrial and consumer product segments;
5. higher Ebitda margin trajectory driven by increasing share of value added products (VAP) revenues, further decentralisation of plants, superior product mix and operating leverage; and
6. fast improving return on capital employed led by strong traction in profitability and higher fixed asset turns.
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