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.