1) Q2FY22 Result Update:
- The Consolidated Revenue from Operations of the company is Rs. 1,926 Cr. for the quarter ended 30th September 2021 against Rs. 1,375 Cr. up by 40.3% YoY and 43.7% QoQ from Rs. 1,342 Cr. in the quarter ended 30th September 2020.
- The Earnings Before Interest, Tax, Depreciation & Amortisation (EBITDA) of the company stood at Rs. 311 Cr. in Q2FY22 from Rs. 256 Cr. in Q2FY21 up by 21.5% YoY. While sequentially, the EBITA has grown by 40% from Rs. 222 Cr. in Q1FY22.
- The EBITDA margin of the company stood at 16.1% in Q2FY22 witnessing a contraction of 250 bps YoY and 40 bps QoQ.
- The Profit Before Tax (PBT) of the company expanded by 30.1% YoY from Rs. 228 Cr. in Q2FY21 to Rs. 296 Cr. in Q2FY22. Sequentially, the PBT of the company grew by 39% from Rs. 213 Cr. in Q1FY22.
- The company registered a Net Profit of Rs. 229 Cr. in the second quarter of FY22 against Rs. 175 Cr. in the same quarter of the previous financial year. Quarter-on-Quarter, the Net Profit of the company grew by 34.4% from Rs. 170 Cr. in Q1FY22.
- The Net Profit Margin of the company was 11.9% for the quarter ended 30th September 2021.
2) Segment-Wise Result Update & Revenue Mix:
- The Company operates in 5 segments: Plastic Piping Products, Industrial Products, Packaging Products, Consumer Products, and Others.
- Revenue from the Plastic Piping Products stood at Rs. 1,267 Cr. in the Q2FY22 against Rs. 847 Cr. in Q2FY21, down by 1.9%. Sequentially, the revenue was up by 52.5% from Rs. 831 Cr. in the Q1FY22.
- Revenue from Industrial Products reported growth of 9.6% YoY from Rs. 181.5 Cr. in Q2FY21 to Rs. 253 Cr. in Q2FY22. Quarter-on-Quarter, revenue from this business segment has gone up from Rs. 27.2% from Rs. 199 Cr. in Q1FY22.
- Packaging Products reported revenue of Rs. 277 Cr. in Q2FY22 against Rs. 220 Cr. in Q2FY21 which accounted for the growth of 11% YoY. Sequentially, this business segment has also up by 13.6% from Rs. 244 Cr. in Q1FY22.
- Consumer Products revenue stood at around 111 Cr. in Q2FY22 against Rs. 85.5 Cr. in Q2FY21, reporting a de-growth of 43.3% YoY. Quarter-on-Quarter revenue from this business segment has increased by 129.4% from Rs. 48.5 Cr. in Q1FY22.
- The Other business contributed Rs. 20 Cr. in Q2FY22.
3) Revenue & EBITDA Trend:
The company has reported a rise in the Revenue from the last QoQ and the revenue is back on the pre-covid level, but still, the revenue is lower as compared to Q4FY21, where the company recorded revenue of Rs. 2,084 Cr.
Like the revenue, the EBITDA of the company has also increased to Rs. 311 Cr. similar to the pre-covid levels, but is below the levels of Q3FY21 & Q4FY21.
4) Business Updates:
i) Volume Update:
- The Company sold 102673 MT of Plastic goods and achieved a net product turnover of Rs. 1901 Crores during the 2nd quarter of the current year against sales of 94836 MT of Plastic goods and achieved net product turnover of Rs. 1322 Crores in the corresponding quarter of the previous year
- The company achieved volume and product value growth of about 8 % and 44 %, respectively.
- The Company had a volume growth of 3% in Protective Packaging Division and 10% in Performance Packaging film in the quarter.
- The demand for Tarpaulins and made-up products made from XF film is maintained at a higher level. The Company can pass the increased raw material prices to its end product. Furniture business has gone up by around 4% in volume in the quarter. The Company has launched new models successfully.
ii) Cash Surplus/Deficit:
The Company has Cash Surplus funds of Rs. 331 crores as of 30th Sep 2021 as against Cash Surplus funds of Rs. 759 crores as of 31st March 2021.
iii) Dividend Update:
- The Board of Directors has declared the interim dividend @ 300 % i.e. Rs. 6 per share of Rs. 2 each (FV), for the financial year 2021-22.
- The record date for the same is November 1st, 2021.
Earnings Call Highlights:
- The company sold 102673 MT of plastic goods in Q2FY22 compared to 94836 MT in Q2FY21.
- In 1HFY22 Plastic sales volumes went down by almost 7% is mainly because April, May being the peak season for the sale of PVC Agri pipes suffered huge destruction due to the second wave of covid resulting in a huge volume loss of 36% which was not recovered yet so for the whole year pipe volume growth is expected to be in the range of 3-4%
- Inventory level is high at 90 days of COGS mainly because of stoking up of resin pipes.
- There is a 30% volume growth in CPVC pipes this quarter still company was unable to meet the domestic demand as demand for CPVC pipes was very strong.
- Revenue from value-added products in Q2FY22 was Rs 758 crores.
- In the composite cylinder, segment management said they are currently in a very established position and as the international market is opening up they are receiving healthy inquiries for composite cylinders from the international market company is also getting repeat orders from the domestic customer as well. Although, the Contribution of composite cylinders in the company’s turnover is very low.
- In the Plastics Pipe segment, the demand from the housing segment has revived. Despite the current high price, the demand outlook in Housing and Agri segment looks maintainable. There is a shift in higher demand for CPVC systems as the prices of that system have not gone high compared to PVC systems.
- The Company has Cash Surplus funds of Rs. 331 crores as of 30th Sep 2021 as against Cash Surplus funds of Rs. 759 crores as of 31st March 2021.
- Overall in the packaging segment, Company’s focus is to boost export business and develop new applications laminating with different substrates to add increased value for its customers. The Company is a solution provider to protect the content by innovative packaging.
- In-tank revenue is expected to reach Rs.200 crores next year.
Inflation & Price Hike:
- Management expects PVC pipes prices in India to rise further in the coming months.
- The company may increase the price further if commodity prices kept on increasing.
- Currently, the company is exporting 1000MT of CPVC pipes per month.
- PVC Agri pipes prices are expected to go further high in coming months so there could be a shift in demand of size of PVC pipe but not expecting any volume loss.
- Management said there is a continuous rise in all grades of Polymer prices, The Polymer prices have raised between 7% to 28% during this quarter. The highest increase was in the price of PVC resin, where prices have gone by Rs 34 per kg. The price increase trend continues unabated in the current quarter also.
Future Plans & Outlook:
- Demand from “Nal Se Jal” projects is expected to come in 2HFY22 because pipes could not be fitted in the rainy season so, demand is expected to revive back from November.
- Under supreme petrochem, the company is working on expanding capacity, and projects for setting up of plant are underway.
- The Company’s progress in putting up plants at Guwahati, Cuttack, and Erode are moving smoothly. All these plants will be operational between January 2022 to May 2022.
- The Company is also adding new systems over and above its existing 36 system in Plastic Pipe System, during this financial year for which the investment plan is going smoothly
- Several new varieties of products have been launched in the Bath fittings division. The appointments of new dealers are continuing. The business is growing. The Company expects to reach Rs. 75 crores business in this division, this year and expected to reach Rs.100 Crores in next year.
- The company expects an EBITDA margin of 15% in Q3FY22 for the piping segment The Company’s envisaged Capex plan of Rs.521 crores for this year including carried forward commitment of the previous year.
What Should Investors Do?
The Company has reported some strong figures in terms of growth in revenue and Net Profit, but EBITDA Margin has contracted significantly due to inflationary pressures on the commodity. Recently the stock has witnessed a sharp downfall in its price from the level of Rs. 2,600 in early October to Rs. 2,351 as of 25th October 2021. Supreme Industries is a leading player in the plastic pipe industry, and hence anyone who wants to take exposure in this industry, then the investor should have this stock on their radar. But do not discuss this discussion as direct investment advice and follow due diligence before making any investment decisions.