Supreme Industries rated ‘Buy’; Focus on value growth rather than volumes


Supreme Industries rated ‘Buy’; Focus on value growth rather than volumes

We hosted investor meet of Supreme Industries. Management reiterated target volume growth at 10-12%, implying value growth of 12-15% (FY19). Focus remains on value growth, profitability and not to chase volumes unless supported by strong RoCE. Key investor concern was whether company’s ability to grow is challenged due to emphasis on maintaining high RoCE.

Management maintained inherent demand drivers are intact: Booming affordable housing, rising farm incomes, shift from unorganised to organised. Given wide product range with continuous new product additions, expansive distribution network, pan-India manufacturing, and higher exports share, Supreme is poised to achieve 12-15% value growth target without compromising on return ratios.

Our view: Buying at CMP implies IRR of 12%, which suggests Supreme would be able to post 12% revenue CAGR over Read More

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