SUPREME INDUSTRIES Sustained volume spurt

(1)

Supreme

Industries’

(SIL)

Q1FY16

(June

year

end)

sales,

EBITDA

and

PAT

at

INR7.7bn,

INR0.9bn

and

INR0.25bn

belied

our

INR8.3bn,

INR1.0bn

and

INR0.43bn

estimates,

respectively,

primarily

on

account

of

inventory

loss

and

lower

‐

than

‐

expected

realization.

Key

positives

were:

(1)

robust

volume

growth

of

16.5%

YoY;

(2)

all

segments

clocked

strong

growth,

except

industrial;

(3)

gross

debt

fell

INR3bn

YoY;

and

(4)

composite

cylinder

&

bathroom

fittings

business

remained

on

track.

Supreme

Petrochem

was

impacted

by

inventory

loss,

a

key

negative.

SIL

expects

to

achieve

volume

growth

of

15 ‐

18%

YoY

(earlier

14 ‐

16%)

along

with

EBITDA

margin

of

13.5 ‐

14.5%

in

FY16.

SIL

indicated

that

raw

material

prices

corrected

during

September

quarter

and

expects

them

to

be

range

bound

in

the

near

term.

We

believe,

focus

on

branded

business

bolstered

by

consistent

product

innovations

and

capacity

expansion

across

segments

will

fuel

the

company’s

growth

going

ahead.

We

anticipate

it

to

be

key

beneficiary

of

improvement

in

domestic

macros.

Maintain

‘BUY’.

Volumes

surge;

lower

interest

drives

PAT

Net sales grew 1.7% YoY to INR7.7bn with volume growth of 16.5% YoY during the

quarter. However, realisation dipped on account of passing on of benefits of falling

raw material prices. EBITDA margin jumped 100bps YoY to 11.7% (estimate 12.7%) on

account of declining raw material prices, despite being impacted by inventory loss (not

quantifiable). Interest cost dipped 28.7% YoY (down 9.1% QoQ) due to lower debt

riding reduced inventory level led by correction in raw material prices. Adjusted PAT

declined 2.1% YoY to INR0.25bn. Supreme Petrochem contributed loss of INR74mn

during Q1FY16 on account of inventory loss of INR0.17bn.

Outlook

and

valuations:

Fundamentals

intact;

maintain

‘BUY’

FY14/15 was an abnormal year for SIL with multiple adverse factors impacting it. We

anticipate better business climate in FY16/17. The company is scaling the growth path

led by new business initiatives and consistent product innovations. We maintain ‘BUY’

with target price of INR760 (20x FY17E EPS) with the company’s holding in Supreme

Petrochem at INR21/share and giving 30% holding discount to its share (29.9%) in SPL.

The stock is trading at 17.3xFY17E EPS.

SUPREME

INDUSTRIES

Sustained

volume

spurt

EDELWEISS RATINGS

Absolute Rating BUY

Investment Characteristics Growth

MARKET DATA (R: SUPI.BO, B: SI IN)

CMP : INR 638 Target Price : INR 760 52‐week range (INR) : 747 / 540 Share in issue (mn) : 127.0 M cap (INR bn/USD mn) : 81 / 1,219 Avg. Daily Vol. BSE/NSE (‘000) : 83.3

SHARE HOLDING PATTERN (%)

Current Q1FY16 Q4FY15

Promoters * 49.7 49.7 49.7 MF's, FI's & BKs 7.4 6.4 6.5 FII's 21.2 22.3 21.5 Others 21.7 21.7 22.3

* Promoters pledged shares (% of share in issue) : NIL PRICE PERFORMANCE (%) BSE Midcap Index Stock Stock over Index 1 month 4.6 4.8 0.2 3 months (0.6) (0.7) (0.1) 12 months 20.7 3.2 (17.5) Manish Mahawar +91 22 6623 3481 [email protected]

In

di

a

M

id

India Equity Research| Miscellaneous

October 29, 2015

Financials (INR mn)

Year to June Q1FY16 Q1FY15 % change Q4FY15 % change FY15 FY16E* FY17E

Net revenues 7,728 7,596 1.7 12,544 (38.4) 41,159 32,304 55,516

EBITDA 908 814 11.5 2,412 (62.4) 5,642 4,620 8,327

Adjusted Net Profit 245 251 (2.1) 1,488 (83.5) 3,224 2,469 4,680

EPS (INR) 1.9 2.0 (2.1) 11.7 (83.5) 25.4 19.4 36.8

Diluted P/E (x) 25.1 NA 17.3

EV/EBITDA (x) 14.7 NA 9.7

ROAE (%) 28.6 19.4 31.4

(2)

Q1FY16

conference

call:

Key

highlights

 Business outlook: During FY16, SIL expects to achieve volume growth of 15‐18% YoY

with EBITDA of 13.5‐14.5%. Management indicated the there was decline in the raw

material prices.

 Value‐added products: The share of value‐added products, as percentage of revenue,

stood at 32.3% in Q1FY16 versus 29.2% in Q1FY15. The Company’s focus remains to

increase the share of value added products in its turnover.

 Revenue growth: Net sales grew 1.7% YoY led by 13.9% and 14.8% growth in piping,

and consumer segments respectively with a decline of 0.3% and 11.7% in packing and

industrial business. Overall volumes jumped 16.5% YoY led by piping (25.9%), packaging

(3.9%) and Consumer (10.3%).

 Operating margin: For Q1FY16, SIL reported operating margin of 13.5%, 15.5%, 9.7%

and 11.2% versus 12.6%, 13.1%, 9.3% and 7.84% in Q1FY15 in piping, packaging,

industrial and consumer businesses, respectively.

 Raw Material: Management indicated that cost of raw materials witnessed decreasing

trend owing to declining crude oil. Overall, the raw material prices are expected to

remain in range bound in near term. SIL incurred Inventory loss on account of falling

raw material prices. Management indicated that further inventory loss is expected in

FY16. However, it is beneficial for business in terms of lower cost and working capital.  CPVC: Volume grew 32% YoY to 2,712MT in Q1FY16 versus 2,054MT in Q1FY15. Sales

stood at INR742mn during Q1FY16 versus INR557mn in Q1FY15. Management expects

a volume growth of 20% for FY16. It highlighted that unorganized players have lost the

market share during the quarter.

 CVPC fire sprinkler system: The company has received its first export order of USD

55,000 of CVPC Fire Sprinkler System “Flameguard” and the management expects the

product to fare well in mere future.

 Silpaulin: Volume stood at 1,951MT in Q1FY16 versus 1,945MT in Q1FY15. Revenues

stood at INR497mn during Q1FY16 versus INR466mn in Q1FY15.

 Construction business: As on 30th September, 2015, the company has 63,848 sq. feet

area for sale.

 Industrial segment: Industrial segment witnessed a tough period with de‐growth of

1.8% in volume and 11.7% in revenue YoY, respectively. Material handling business

grew 7 % YoY in volume and declined 2% YoY in value. Components (automobile and

non automobile) business declined 14% and 6% in volume and value, respectively.  Industrial promotion subsidy: The company received subsidy of INR13mn during

Q1FY16 versus INR60mn in Q1FY15. The subsidy entitlement related to the Gadegaon

plant ceased by January FY15 which led to a sharp reduction in subsidy.

 Composite cylinder: SIL expects the government refineries to place an educational

order of 8,000‐12,000 pieces during November, 2015. Company expects to supply 5,000

pieces to South Korea during November‐December, 2015. The company is also involved

in active discussion with three countries for their requirement of LPG Cylinders. SIL is

optimistic about its product and its potential.

 Capex: Management highlighted that it will incur a CAPEX of INR2bn for FY16. Its new

(3)

Malanpur have commenced, but the Commercial production is going to begin during

November, 2015. The management plans to start the packing and plastic piping

production at the Kharagpur plant in November, 2015 and CVPC and Water tank

production in March‐April, 2017.

 Debt: The gross debt and net debt as on 30th September, 2016 was INR4.7bn and INR

3.5bn, respectively, versus INR 7.7bn and INR 6bn as on 30th September, 2015. Further

the average cost of capital for the company stood at 8.9% in Q1FY16 versus 8.8% in

Q1FY15.

 Supreme Petrochem: SIL volume grew 22% YoY in Q1FY16. Management expects

volume growth of 17‐18% during FY16 (9months).

Q4FY15

conference

call:

Key

highlights

 Business outlook: During FY16, SIL expects to achieve volume growth of 14‐16% YoY

with EBITDA of 13.5‐14.0%. Management indicated the there was extreme volatility in

polymer prices in FY15 (June ended). The volatility affected consumption of plastic in

India. Polymer consumption grew at around 8% between July 2014 and June 2015. The

company also believes that during 2015‐16 volatility will not be repeated.

 Value‐added products: The share of value‐added products, as percentage of revenue,

stood at 34.2% in FY15 versus 32.3% in FY14. It stood at 34.75% in Q4FY15 versus

31.75% in Q4FY14.

 Revenue growth: Net sales grew 5.5% YoY led by 3%, 13%, 8%, 7% growth in piping,

packaging, industrial and consumer segments, respectively. Overall volumes jumped

9.6% YoY led by consumer (5%), packaging (14%), industrial (11%) and piping (9%).  Operating margin: For Q4FY15, SIL reported operating margin of 18%, 27%, 16% and

21% in piping, packaging, industrial and consumer businesses, respectively.

 CPVC: Volume stood at 4,162MT in Q4FY15 versus 3,190MT in Q4FY14. Sales stood at

INR1,090mn during Q4FY16 versus INR840mn in Q4FY14.

 Silpaulin: Volume stood at 5,861MT in Q4FY15 versus 5,201MT in Q4FY14. Revenues

stood at INR1,480mn during Q4FY15 versus INR1,260mn in Q4FY14. For FY15, revenue

stood at INR4,530mn, whereas volumes stood at 19,283MT.

 Depreciation: The company has provided a higher depreciation of INR280.4mn during

the year in compliance with Companies Act 2013.

 Construction business: During Q4FY15, SIL realised INR336.5mn from sale of 12,540 sq

ft, whereas it realised INR1,393.2mn from the sale of 81,831 sq ft during FY15.

Remaining area available for sale is 53,800 sq ft.

 Industrial promotion subsidy: The company received subsidy of INR36.5mn during

Q4FY15 and INR253mn in FY15 (INR177mn in Q4FY14 and INR 469.4mn in FY14). The

subsidy entitlement related to the Gadegaon plant ceased by January FY15 which led to

a sharp reduction in subsidy.

 Composite cylinder: The company got approval from Korean Gas Safety Corporation for

2 sizes of 12.5litre and 30.5litre. SIL is optimistic about the product and its potential.

Government refineries have floated an execution order in 2 sizes of cylinders of

12.5litre and 24litre. The company has got special approval for the same . SIL will

participate in these sizes and expects a positive outcome. It expects some more time

(4)

 Capex: SIL incurred capex expenditure of INR1.97bn during FY15. Further the company

plans to incur INR2bn for FY16. Its new plastic product complex at Kharagpur in West

Bengal is likely to commence production during the current year and the roto molding

unit at Malanpur is likely to be operational during FY16. SIL is introducing several

varieties of molded fittings at Jalgaon and Malanpur plants. It is also constructing a

new building and installing special machine for making varieties of cross laminated film

at Gujarat plant.

 Supreme Petrochem: SIL’s share of profit in Supreme Petrochem for Q4FY15 stood at

INR 198mn. Management highlighted that 50% of profits were from inventory gains.

The company started achieving positive volume growth compared to FY12‐13 and FY13‐

14. SIL believes that Supreme Petrochem will require no new investment and will

become a debt free company. It expects to maintain operating margin of 7% for the

coming year.

Table 1: Segmentwise volume breakup

Table 2: Segmentwise volume growth (YoY)

Table 3: Segment revenue

Table 4: Segmentwise Revenue growth (YoY)

Table 5: Segmentwise Realization per unit

Source: Company, Edelweiss research

(MT) Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16

Piping 32,337 42,388 50,521 62,705 30,086 47,675 59,714 66,789 37,867 Industrial 7,486 7,747 9,603 8,784 8,519 8,736 10,919 13,131 8,360 Packaging 6,915 12,125 8,556 11,120 7,482 12,836 10,648 9,296 7,771 Consumer 3,240 4,058 3,669 4,209 2,926 3,797 4,432 4,828 3,228

(%) Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16

Piping 6.9 3.5 6.4 18.1 (7.0) 12.5 18.2 6.5 25.9 Industrial (12.7) (25.3) (13.6) (16.9) 13.8 12.8 13.7 49.5 (1.9) Packaging (6.4) 16.4 (21.9) 5.1 8.2 5.9 24.5 (16.4) 3.9 Consumer (8.4) (16.5) (25.8) (23.0) (9.7) (6.4) 20.8 14.7 10.3

(Mn) Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16

Piping 3,670 4,570 5,420 6,940 3,520 4,920 5,670 7,020 4,015

Industrial 1,290 1,340 1,670 1,550 1,590 1,580 1,770 2,690 1,404

Packaging 1,240 2,470 1,960 2,390 1,590 2,670 2,170 1,540 1,585

Consumer 500 580 630 780 510 660 730 860 581

Piping 22.3 19.0 15.8 28.5 (4.2) 7.7 4.6 1.2 14.1 Industrial ‐ (12.4) (4.0) 6.2 23.1 17.9 6.0 73.5 (11.6) Packaging (0.8) 26.0 9.5 16.6 28.5 8.1 10.7 (35.6) (0.6) Consumer ‐ (15.9) (10.0) (10.3) 1.2 13.8 15.9 10.3 14.8

(INR) Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16

Piping 113.5 107.8 107.3 110.7 116.9 103.2 95.0 105.1 106.0 Industrial 172.3 173.0 173.9 176.5 186.4 180.9 162.1 204.9 167.9 Packaging 179.3 203.7 229.1 214.9 213.0 208.0 203.8 165.7 203.9 Consumer 154.3 142.9 171.7 185.3 173.0 173.8 164.7 178.1 180.0

(5)

Table 6: Segmentwise Realization per unit growth (%)

Source: Company, Edelweiss research

Piping 14.5 14.9 8.9 8.9 3.0 (4.3) (11.5) (5.0) (9.3) Industrial 14.6 17.3 11.1 27.8 8.1 4.6 (6.8) 16.1 (9.9) Packaging 6.0 8.3 40.3 10.9 18.8 2.1 (11.0) (22.9) (4.3) Consumer 9.2 0.7 21.3 16.5 12.1 21.6 (4.1) (3.9) 4.1

(6)

Financial snapshot (INR mn)

Year to March Q1FY16 Q1FY15 % change Q4FY15 % change FY15 FY16E* FY17E

Net revenues 7,728 7,596 1.7 12,544 (38.4) 41,159 32,304 55,516 Raw material 4,941 5,113 (3.4) 8,202 (39.8) 28,666 22,355 38,306 Staff costs 422 366 15.3 527 (19.9) 1,685 1,292 2,054 Other expenses 1,457 1,303 11.9 1,404 3.8 5,165 4,038 6,828 Total expenditure 6,820 6,781 0.6 10,132 (32.7) 35,516 27,685 47,188 EBITDA 908 814 11.5 2,412 (62.4) 5,642 4,620 8,327 Depreciation 335 348 (3.9) 355 (5.8) 1,390 1,094 1,608 EBIT 573 466 23.0 2,057 (72.1) 4,253 3,526 6,719 Other income 15 4 300.5 9 62.5 1,044 320 440 Interest 99 139 (28.2) 109 (9.1) 579 324 377

Add: Prior period items

Profit before tax 489 331 47.6 1,957 (75.0) 4,718 3,522 6,782

Provision for taxes 169 113 50.2 659 (74.3) 1,600 1,162 2,238

Minority interest

Associate profit share (74) 32 NA 190 NA 106 109 136

Profit‐ Discontinued Ops

Exceptional Items ‐ ‐ 110 (100.0) ‐ ‐ ‐

Reported net profit 245 251 (2.1) 1,598 (84.6) 3,224 2,469 4,680

Adjusted Profit 245 251 (2.1) 1,488 (83.5) 3,224 2,469 4,680

Equity capital(FV INR10) 254 254 254 254 254 ‐

Diluted shares (mn) 127 127 127 127 127 127

Adjusted Diluted EPS 1.9 2.0 11.7 25.4 19.4 36.8

Diluted P/E (x) ‐ ‐ ‐ 25.8 ‐ 17.8 EV/EBITDA (x) ‐ ‐ ‐ 14.7 ‐ 9.7 ROAE (%) ‐ ‐ ‐ 28.6 19.4 31.4 As % of net revenues Raw material 63.9 67.3 65.4 69.6 69.2 69.0 Employee cost 5.5 4.8 4.2 4.1 4.0 3.7 Other expenses 18.9 17.1 11.2 12.5 12.5 12.3 EBITDA 11.7 10.7 19.2 13.7 14.3 15.0

Reported net profit 3.2 3.3 11.9 7.8 7.6 8.4

(7)

Company

Description

SIL is one of the most prominent plastic manufacturing companies in India, having over 44

years of experience under the current management. It has been consistently increasing

capacity in the plastics processing and has more than 7000 diversified products. It processes

over 0.2 mn metric tonnes of plastic per annum, and has 19 manufacturing locations across

India.

The company’s core operations involve processing polymers and resins into diversified

plastic products spread under four broad categories: industrial products, consumer

products, piping products and packaging products. Over the years, SIL has managed to gain

a significant market share across its product portfolio. It is credited with pioneering various

products including Cross‐ Laminated Films, HMHD Films, Multilayer Films, SWR Piping

Systems, PP Mats etc. The company currently has around 1200 distributors of which 600

distributors are for PVC Pipes, 400 for furniture, 60 for cross laminated films and 140

accounting for others

Investment

Theme

Supreme industries, the largest private plastic processing player in India, is poised to be the

biggest beneficiary of shift from metals to plastic and higher GDP growth of India. Supreme

has detailed a road map that will entail deployment of a sizeable capex of INR 10bn over by

2014‐15. Post the capex, the installed capacity would expand from 3,49,700 MT pa in FY12

to 5,49,500 MT pa by FY15‐16, marking a CAGR increase of 9.5%.

The company has a strong balance sheet with the debt to equity at 0.4x in FY14. SIL has

strong operating and free cash flows to fund its capex from internal accruals – a great

comfort factor. Moreover the company’s net working capital cycle stands at around 20‐30

days, one the best in the industry as it gives cash discounts to customers on early payments

as well as imports raw materials against which it gets a higher credit period. It also has

strong return ratios with ROCE at 39% and ROE at 28.6% for FY15. Shareholders have been

consistently rewarded with its liberal dividend policy (distributing ~30% of its profits as

dividend).

Key

Risks

The plastic industry is highly fragmented with unorganized players accounting for 60% of the

output and posing a stiff competition to SIL .

Sharp increase in raw material prices of PVC,LDPE,HDPE and delays in passing on the same.

The company has an asset heavy model hence needs to invest continuously in the business

to sustain growth. Any delay in expansion plans can affect the turnover of the business as

the same has been factored in our model.

Unavailability of skilled labour might hurt the capacity utilization of one or many plants

thereby affecting the turnover and performance.

The plastic industry has been growing in range of 1.8x‐2x GDP growth rate of India.Hence

any slowdown in GDP growth of the country might affect the topline of the company.

(8)

Financial

Statements

Income statement (INR mn)

Year to March FY14 FY15 FY16E* FY17E

Net revenue 39,020 41,159 32,304 55,516 Materials costs 27,284 28,666 22,355 38,306 Gross profit 11,736 12,493 9,950 17,210 Employee costs 1,440 1,685 1,292 2,054 Other Expenses 4,802 5,165 4,038 6,828 Total operating expenses 33,526 35,516 27,685 47,188 EBITDA 5,494 5,642 4,620 8,327 Depreciation 1,015 1,390 1,094 1,608 EBIT 4,479 4,253 3,526 6,719 Add: Other income 426 1,044 320 440 Less: Interest Expense 761 579 324 377 Profit Before Tax 4,143 4,718 3,522 6,782 Less: Provision for Tax 1,399 1,600 1,162 2,238 Associate profit share 91 106 109 136 Reported Profit 2,835 3,224 2,469 4,680 Adjusted Profit 2,835 3,224 2,469 4,680 Shares o /s (mn) 127 127 127 127 Adjusted Basic EPS 22.3 25.4 19.4 36.8 Diluted shares o/s (mn) 127 127 127 127 Adjusted Diluted EPS 22.3 25.4 19.4 36.8 Adjusted Cash EPS 32.4 34.9 28.0 49.5 Dividend per share (DPS) 8.0 9.0 8.0 9.0 Dividend Payout Ratio(%) 41.9 42.6 48.2 28.6

Common size metrics

Operating expenses 16.0 16.6 16.5 16.0 Cost of goods sold 69.9 69.6 69.2 69.0 Depreciation 2.6 3.4 3.4 2.9 EBITDA margins 14.1 13.7 14.3 15.0 Net Profit margins 7.3 7.8 7.6 8.4 Growth ratios (%)

Revenues 15.2 5.5 NA NA

EBITDA 4.5 2.7 NA NA

Adjusted Profit (2.3) 13.7 NA NA

EPS (2.3) 13.7 NA NA

*FY16E: July 01, 2015 to March 31, 2016

Key Assumptions

Macro GDP(Y‐o‐Y %) 6.9 7.4 8.0 8.7 Inflation (Avg) 9.5 6.7 5.0 5.0 Repo rate (exit rate) 8.0 7.5 6.8 6.5 USD/INR (Avg) 60.5 61.2 64.5 65.0 Company

Segment wise rev growth%

Industrial (3.6) 30.4 (25.7) 55.2 Consumer (9.8) 10.8 (15.6) 88.7 Packging 15.1 (1.1) (14.0) 66.0 Pipes 21.8 2.6 (27.1) 84.8 Industrial Products 5,850 7,630 5,672 8,804 Consumer Products 2,490 2,760 2,330 4,399 Packaging Products 8,060 7,970 6,856 11,384 Plastic Piping 20,600 21,130 15,394 28,446 Margins % Industrial Products 11.0 12.1 11.5 13.5 Consumer Products 11.0 14.8 11.5 12.5 Packaging Products 19.0 18.5 19.0 20.0 Plastic Piping 14.0 13.3 12.0 14.0 Financial assumptions Avg. Interest rate (%) 16.2 13.4 11.0 11.0 Depreciation rate (%) 6.0 7.7 7.5 7.5 Tax rate (%) 33.8 33.9 33.0 33.0 Capex (INR mn) 1,471 907 2,000 2,000 Debtor days 20 21 27 18 Inventory days 65 61 85 62 Payable days 42 37 53 37 Cash conversion cycle 43 45 59 43

(9)

Peer comparison valuation

Market cap Diluted P/E (X) EV / EBITDA (X) ROAE (%)

Name (USD mn) FY16E FY17E FY16E FY17E FY16E FY17E

Supreme Industries 1,219 32.8 17.3 17.9 9.7 19.4 31.4

Sintex Industries Ltd 701 7.7 6.0 6.2 5.1 11.5 12.9

Median ‐ 20.2 11.7 12.1 7.4 15.4 22.2

AVERAGE ‐ 20.2 11.7 12.1 7.4 15.4 22.2

Source: Edelweiss research

Cash flow metrics

Operating cash flow 3,351 6,008 3,167 5,259 Investing cash flow (1,337) (1,860) (1,131) (2,093) Financing cash flow (1,903) (2,567) (1,513) (2,715) Net cash Flow 111 1,581 523 451 Capex (1,445) (1,936) (1,131) (2,093) Dividend paid (1,115) (1,197) (1,189) (1,338)

Profitability and efficiency ratios

ROAE (%) 29.6 28.6 19.4 31.4 ROACE (%) 34.3 34.0 23.1 39.1 ROA 18.4 19.3 14.0 24.2 Interest Coverage Ratio 5.9 7.3 10.9 17.8 Debt / Cap employed (%) 68.8 66.5 66.0 60.2 Operating ratios

Total Asset Turnover 2.5 2.5 1.8 2.9 Fixed Asset Turnover 3.6 4.0 2.9 4.8

Equity Turnover 8.1 7.3 5.1 7.5

Du pont analysis

Net Profit Margin 7.3 7.8 7.6 8.4 Total Asset Turnover 2.5 2.5 1.8 2.9 Leverage Multiplier 1.6 1.5 1.4 1.3 ROAE (%) 29.6 28.6 19.4 31.4 Valuation parameters

Adj. Diluted EPS (INR) 22.3 25.4 19.4 36.8 Y‐o‐Y growth (%) (2.3) 13.7 (23.4) 89.6 Adjusted Cash EPS (INR) 32.4 34.9 28.0 49.5 Diluted P/E (x) 28.6 25.1 32.8 17.3 P/B (x) 7.8 6.7 6.1 4.9 EV / Sales (x) 2.2 2.0 2.6 1.5 EV / EBITDA (x) 15.6 14.7 17.9 9.7 Dividend Yield (%) 1.3 1.4 1.3 1.4

*FY16E: July 01, 2015 to March 31, 2016

Balance sheet (INR mn)

As on 31st March FY14 FY15 FY16E* FY17E

Share capital 254 254 254 254 Reserves & Surplus 10,138 11,861 13,031 16,238 Shareholders' funds 10,392 12,115 13,286 16,492 Short term borrowings 2,053 1,599 1,599 1,099 Long term borrowings 2,646 2,329 2,329 1,829 Total Borrowings 4,699 3,929 3,929 2,929 Long Term Liabilities 111 115 127 139 Def. Tax Liability (net) 1,168 895 895 895 Sources of funds 16,370 17,054 18,236 20,455 Gross Block 17,538 18,445 20,445 22,445 Net Block 10,820 10,151 11,058 11,449 Capital work in progress 181 998 129 222 Intangible Assets 59 174 174 174 Total Fixed Assets 11,060 11,323 11,360 11,845 Non current investments 1,074 1,207 1,207 1,207 Cash and Equivalents 246 1,817 2,340 2,792 Inventories 4,976 4,647 5,716 7,346 Sundry Debtors 2,348 2,380 2,407 3,103 Loans & Advances 2,045 2,179 2,397 2,637 Other Current Assets 18 16 18 19 Current Assets (ex cash) 9,387 9,222 10,539 13,106 Trade payable 2,777 3,004 3,430 4,408 Other Current Liab 2,620 3,512 3,781 4,087 Total Current Liab 5,397 6,517 7,211 8,495 Net Curr Assets‐ex cash 3,990 2,705 3,327 4,611 Uses of funds 16,370 17,054 18,236 20,455 BVPS (INR) 81.8 95.4 104.6 129.8

Free cash flow (INR mn)

Reported Profit 2,835 3,224 2,469 4,680 Add: Depreciation 1,015 1,390 1,094 1,608 Interest (Net of Tax) 510 388 217 253 Others 390 241 (2) (12) Less: Changes in WC 1,400 (765) 611 1,270 Operating cash flow 3,351 6,008 3,167 5,259 Less: Capex 1,445 1,936 1,131 2,093

Free Cash Flow 1,906 4,072 2,036 3,166

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Holding Top ‐10

Perc. Holding Perc. Holding

Nalanda India Fund Ltd 6.44 DSP Black Rock investment Manager 0.95

HDFC Asset Management 3.02 Schroder Investment Mgt Ltd 0.81

Cartica Capital 2.77 William Blair 0.45

Mattews International Capital 2.46 Dimensional Fund Advisors LP 0.45

SBI Funds Management 2.13 Kotak Mahindra 0.43

*as per last available data

Insider Trades

Reporting Data Acquired / Seller B/S Qty Traded

16 Feb 2015 Space Age Chemplast Private Limited Buy 30000.00

Bulk Deals

Data Acquired / Seller B/S Qty Traded Price

No Data Available

Additional

Data

Directors Data

B. L. Taparia Chairman M. P. Taparia Managing Director

S. J. Taparia Executive Director V. K. Taparia Executive Director

B. V. Bhargava Director H. S. Parikh Director

N. N. Khandwala Director S. R. Taparia Director

Y. P. Trivedi Director

Auditors ‐ M/s. Chhogmal & Co.,

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`

Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098.

Board: (91‐22) 4009 4400, Email: [email protected]

Nirav Sheth

Head Research

[email protected]

Coverage group(s) of stocks by primary analyst(s): Miscellaneous

Agro Tech Foods, Bayer Cropscience, CCL Products India, Dhanuka Agritech, Jain Irrigation, PI Industries, Rallis India, Supreme Industries, Solar Industries, UPL.

Distribution of Ratings / Market Cap Edelweiss Research Coverage Universe

Rating Distribution* 155 45 8 208

* stocks under review

Market Cap (INR) 151 54 3

> 50bn Between 10bn and 50 bn < 10bn

Date Company Title Price (INR) Recos

Buy Hold Reduce Total

Recent Research

29‐Oct‐15 PI Industries Holding ground in a challenging environment;

Result Update

647 Hold

27‐Oct‐15 Rallis India Trouble piles up;

Result Update

207 Hold 26‐Oct‐15 UPL Commendable show in tough

times; Result Update 448 Buy Rating Interpretation Buy appreciate more than 15% over a 12‐month period Hold appreciate up to 15% over a 12‐month period Reduce depreciate more than 5% over a 12‐month period Rating Expected to

One year price chart

458 542 626 711 795 879 Oc t ‐ 14 No v ‐ 14 De c ‐ 14 Ja n ‐ 15 Fe b ‐ 15 Ma r ‐ 15 Ap r ‐ 15 Ma y ‐ 15 Ju n ‐ 15 Ju l ‐ 15 Au g ‐ 15 Se p ‐ 15 (I N R ) Supreme Industries

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