Supreme Petrochem: Leading the Chem Space

“The company is the undisputed leader in Polystyrene in lndia with a market share of over 50% and SPL is also the largest exporter of polystyrene from lndia with customers in over 100 countries around the globe. SPL forayed into Expanded polystyrene in 2006 and since then has become the leader with over 50% market share in this segment as well.”

– Mr. Rakesh Nayyar, Executive Director & CFO, Supreme Petrochem on Q1FY24 ConCall

Stock Data
Ticker	SPLPETRO
Exchange	NSE
Industry	PETROCHEMICAL

Price Performance
Last 5 Days	+3.42%
YTD	+13.57%
Last 12 Months	+10.89%

*As of 25.08.2023

Company Description:

Supreme Petrochem Ltd. is an Indian company primarily engaged in the business of manufacturing and marketing of Polystyrene (PS) and Expandable Polystyrene (EPS) products. The company’s business model can be summarized as follows:

• Manufacturing: Supreme Petrochem manufactures a range of PS and EPS products. Polystyrene is used in various applications, including packaging, consumer goods, and construction, while Expandable Polystyrene is commonly used in insulation, packaging, and other construction-related products. The company operates manufacturing facilities to produce these materials.

• Marketing and Sales: Supreme Petrochem markets and sells its products to a wide range of industries and customers, both in India and internationally. They may sell their products directly to customers or through distributors and dealers.

• Research and Development: Like many chemical and petrochemical companies, research and development play a crucial role in Supreme Petrochem’s business model. They invest in R&D to develop new products, improve existing ones, and find more efficient manufacturing processes.

• Supply Chain Management: Managing the supply chain efficiently is essential in the chemical industry. Supreme Petrochem would work to secure a stable supply of raw materials while ensuring the timely delivery of finished products to customers.

Financial Results:

Supreme Petrochem Ltd reported Revenues for Q1FY24 of ₹1,225.00 Crores down from ₹1,485.00 Crore year on year, a fall of 17.51%.

Total Expenses for Q1FY24 of ₹1,150.00 Crores down from ₹1,246.00 Crores year on year, a fall of 7.7%.

Consolidated Net Profit of ₹69.00 Crores down 63.49% from  ₹189.00 Crores in the same quarter of the previous year.

The Earnings per Share is ₹3.68, down 63.42% from ₹10.06 in the same quarter of the previous year.

Key Strengths:

• Expertise in Polystyrene and Expandable Polystyrene (EPS): Supreme Petrochem had extensive experience and expertise in the manufacturing of Polystyrene (PS) and Expandable Polystyrene (EPS) products. This expertise allowed the company to produce high-quality materials and cater to various industries such as packaging, construction, and consumer goods.

• Strong Market Presence: The company had a significant presence in the Indian market and a growing international footprint. This strong market presence allowed Supreme Petrochem to access a wide customer base and explore new business opportunities.

• Diverse Product Portfolio: Supreme Petrochem offered a diverse range of PS and EPS products, catering to different industries and applications. This diversity in its product portfolio helped the company mitigate risks associated with fluctuations in specific market segments.

• Quality Assurance and Control: Supreme Petrochem was known for its commitment to maintaining high-quality standards in its products. Stringent quality control measures ensured that its products met industry standards and customer expectations.

• Strong Distribution Network: The company had an established distribution network, including dealers and distributors, which facilitated the efficient distribution of its products across India and in international markets.

• Export Opportunities: The company’s products had export potential, which could open up new revenue streams in international markets.

Key Weaknesses:

• Dependence on Petrochemical Prices: Supreme Petrochem’s financial performance and profitability were susceptible to fluctuations in petrochemical feedstock prices. Variations in the prices of raw materials, such as crude oil and natural gas, could impact the company’s production costs and profit margins.
  
• Cyclicality: The petrochemical industry, including the production of Polystyrene (PS) and Expandable Polystyrene (EPS), can be cyclical. Economic downturns or changes in market demand for these products could affect the company’s sales and revenue.

• Competition: The company faced competition from both domestic and international petrochemical manufacturers. Competitive pressures could lead to pricing pressures and reduced margins.

• Energy Costs: Fluctuations in energy costs, particularly in the prices of natural gas and electricity, could impact the company’s operational expenses.