The Supreme Industries Limited Q4 FY24 Earnings Conference Call Insights

Key highlights from The Supreme Industries Limited (SUPREMEIND) Q4 FY24 Earnings Concall

• Financial Performance
  • Q4 net product turnover: INR2,979 crores, up 37% YoY.
  • FY24 net product turnover: INR10,022 crores, up 11% YoY.
  • Q4 consolidated operating profit: INR531 crores.
  • Q4 consolidated profit after tax: INR355 crores.
  • FY24 consolidated operating profit: INR1,654 crores, up 22% YoY.
  • FY24 consolidated profit after tax: INR1,070 crores, up 24% YoY.
• Business Outlook
  • Indian economy achieved highest growth in FY24 among advanced economies.
  • Government initiatives to boost manufacturing and infrastructure expected.
  • Plastic piping system business expected to grow 25% in volume in FY25.
  • Overall company expects 20% volume growth in FY25.
  • Long-term scenario remains bullish due to economic reforms.
• Capacity Expansion
  • Planned capex of around INR1,500 crores in FY24.
  • New plants planned at Kanpur, Patna, Vijayawada, and near JNPT port.
  • Capacity to be funded from internal accruals.
  • Brownfield expansions at existing manufacturing sites.
  • Total installed capacity at FY24-end was 950,000 MT across segments.
  • Capacity expected to increase by 100,000 MT to 1,050,000 MT by FY25-end.
  • Major capacity additions planned in the plastic piping segment to 835,000 MT.
  • Committed capex of INR500 crores at FY24 start to be completed in FY25.
• Product Segments
  • Plastic piping systems grew 34% in volume, 15% in value in FY24.
  • Packaging products grew 8% in volume, 7% in value.
  • Industrial products grew 5% in volume, declined 30% in value.
  • Consumer products remained flat in volume, declined 1% in value.
  • Value-added products turnover increased 13% to INR3,737 crores.
• New Product Launches
  • 5 new plastic piping systems to be launched in FY25.
  • Bath fittings and sanitary SKUs to increase from 421 to over 1,000.
  • New PVC profile manufacturing unit with 5,000 ton capacity.
  • Cross-laminated plastic film production to commence in Q2 FY25.
  • Expanding range of dustbins and auto-molded panels in material handling division.
  • Launching PERT piping system for hot water applications.
  • Introducing acoustic polypropylene pipe system for low noise transmission.
  • Adding polypropylene gas piping system to product portfolio.
• Margins
  • Gross margins had declined in the previous three quarters.
  • However, margins improved in Q4, with the company maintaining EBITDA margins around 50-51%.
  • Better economies of scale from capacity expansions to aid margin improvement.
• Plastic Piping Focus
  • Plastic piping segment contributed around 70% to revenues in FY24.
  • Company plans to invest more in this high-growth segment over the next 5+ years.
  • Focus on plastic piping to help achieve greater cost optimization and higher market share.
• Oil & Gas Opportunity
  • Oil & gas segment offers 200,000 MT annual demand opportunity for plastic pipes.
  • Company getting approvals for supplying to oil & gas companies like IOCL.
  • Setting up new capacity at Kharagpur to cater to this segment cost-effectively.
  • Potential big business opportunity once gas distribution picks up.
• Jal Jeevan Mission
  • Contributed around 25,000 tons or 5% of plastic piping volumes in FY24.
  • Expected to drive growth over next 2 years, but visibility limited.
  • Orders received monthly from contractors across 8 locations.
• PVC and CPVC Price Outlook
  • Difficult to forecast PVC prices for full year amid global economic slowdown.
  • No major upside expected unless anti-dumping duty imposed by India.
  • Red Sea disruption caused 20-day delay in US supplies, minor freight impact.
  • Players reducing CPVC production as unable to raise prices amid weak demand.
  • Company has dropped CPVC pipe prices substantially to maintain thin margins.
  • Uncertain if CPVC prices have bottomed out or further correction is likely.
• Growth and Market Share
  • Company’s market share in plastic piping segment is around 12% in FY24.
  • Industry volume growth for plastic piping was 13.79% in FY24.
  • Company expects 25% volume growth in plastic piping in FY25 vs. industry growth estimate of 12%.
  • Real estate sector expected to drive fastest growth among end-user segments in FY25.
• Capacity Utilization
  • Plastic piping plants operated at decade-high 75% utilization in FY24.
  • Despite 25% targeted volume growth in FY25, no capacity constraints expected.
  • Capacity additions of 100,000 MT planned, can add more if required.
  • No issues with supply of raw material or power anticipated.
• Margins and Realizations
  • Annualized packaging margins expected to improve from FY24 levels.
  • More value-added products and increasing exports to aid margin expansion.
  • Realizations in packaging segment expected to remain firm going forward.
  • EBITDA/kg showing declining trend, strategy to prioritize volumes over margins.