Wednesday, September 08, 2010

Supreme Industries - Interesting Play on plastics and Real-Estate

Notes from Annual Report 2010

* The company expects to achieve 20%+ volume growth per year in medium term
* No significant change in product wise share of revenue
* Crisil has upgraded the rating outlook from A+Stable to A+Positive
* 1, 3 and 5 year sales growths are: 20%, 17.76% and 18.45% respectively
* 1, 3 and 5 year PAT growths are: 48.6%, 42.39% and 43.66% respectively
* Last 3 years average RoCE is 33%
* Last 3 years average RoE is 34%
* Long term Debt-Equity ratio has reduced from 1.02 to .49. This should reduce even more with the increased sale of the commercial building space.

PLASTIC PIPING SYSTEMS
* India's capacity for PVC resin is 67% of demand. Rest is imported.
* Kanpur plant's capacity to be expanded from 8000 tons p.a to 15000 tons p.a. Plant is to be commissioned by Dec'10
* Newly launched Lifeline CPVC grew more than 120%
* "Aqua Gold" plumbing system for cold water has grown by over 50%. It is successfully replacing GI pipes.
* Expects the renovation market to drive demand as more buildings undergo renovation
* Polyethylene pipes have grown over 100% by volume
* Exports have reduced by 9.21%

FURNITURE
* Growth of 26% by value and 23% by volume - indication of improved pricing due to better branding
* Planning new factory in Andhra Pradesh - plan to start production by end of 2010
* Plans to increase exclsuive franchise showrooms from 209 to 300 across India in 2010

INDUSTRIAL PRODUCTS
* Bagged all plastic body washing machine project from Whirlpool - production to begin by Sep'10
* Bagged order for manufacturing Tata Swach water purifiers from Tata Chemicals
* Expanding capacity in Noida,Gadegaon and Durgapur to meet Tata Swach requirements
* Volume growth of 25% and value growth of 20% - indicative of pricing pressure

PACKAGING PRODUCTS
* Volume growth of 24%
* New 5 and 7 layer lines are operating at 100% utilization
* Expanding capacity of the 7 layer line by over 50%+ (from 6000 tons to 9500 tons)
* Expecting a growth of 25% and expecting to reach full utilization by June 2010
* The Khopoli plant unit was the first and only multilayer packaging company to receive the BRC (British Retail Consortium) certificate to export to European markets.
* Very good traction seen in the construction and insulation business
* Growth in the insulation division impacted due to unavailability of skilled labour

CONSTRUCTION
* One block of the "Supreme Chambers" at Andheri has already been sold for 20.5 crs and negotiations are on for a few more.
* Commercial property offtake looks weak and it may take some time to sell all the units

Expected EPS (not adjusted for the split) for June 2011 : 70-75
PE range : 8-12
Expected price range : 560 - 900
Building sale : Expected sale price based on executed deal maybe between 270 to 340 crs. EPS from building sale may be around 108 - 136 (assuming the whole building is sold off in FY11).
Payout ratio is about 30% so its possible to see an exceptional dividend of Rs 30-35/per share.
Price of shares may go up significantly based on the property sale to adjust for one time income. That would be the cue to take profits.

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