Accumulate Supreme Industries; target of Rs 3583: Prabhudas Lilladher

What happened

Prabhudas Lilladher downgraded Supreme Industries to 'ACCUMULATE' from 'BUY' and cut its target price to INR 3,583 from INR 4,414. Supreme Industries lowered its FY27 volume growth guidance to about 10% overall and 13% for plastic piping.

Confirmed

Global impact / market context

A lower target price means the broker expects less upside for investors. Slower volume growth guidance suggests fewer units sold than previously planned, which can limit revenue growth even if profit per sale stays steady.

Analyst inference

Supreme Industries kept its EBITDA margin guidance at 14–14.5%. EBITDA margin is profit per sale before interest, taxes, depreciation and amortisation. A 10–15 day lag in passing on PVC and CPVC prices weighed on Q2FY27 margins.

Analyst inference

What to watch

1. FY27 capital spending cash outflow is expected at INR 7–7.5bn, with greenfield and brownfield expansions progressing as planned. Capital spending means money used for new plants and equipment. Confirmed
2. The company announced further price increases of 3–7% on CPVC products, a proposal that could help recover higher raw material costs if buyers accept the higher prices. Proposed
3. Watch whether packaging and consumer segment costs ease as polyethylene prices change, since sharp increases there weighed on margins and could keep profit per sale under pressure. Analyst inference

Evidence

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