Stock of this leading plastic manufacturer suffers due to extreme margin pressure in Q3FY22!

resr 5paisa Research Team 13th December 2022 - 01:46 pm
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In Q3FY22 Supreme Industries had a tepid revenue growth and decline in profits YoY, with disappointing margins which had an impact on the stock price.

Leading plastic products manufacturer Supreme Industries has announced its Q3 results yesterday during market hours. It got some upward momentum post result announcement, gained 1.2% within an hour. But went southward and today is down by 3.5%.

Q3 earnings report:  

On a consolidated basis, Supreme Industries revenue grew 5% to Rs 1,948 crore on a YoY. Overall the company’s volume sale has gone down by around 18%. Major revenue contributor Plastic piping (60% of revenue) was flat on YoY, due to a swing in the prices which have affected overall demand for the products. Due to supply chain disruption, the company had suffered de-growth in the CPVC pipe system.

Industrial products (15% of total revenue) and packaging products (20% of revenue) had a decent increase in YoY revenue growth due to demand for performance packaging film which has shown 50% growth in volume mostly from the export market.

EBITDA declined 19% to Rs 369 crore on YoY and got contracted 600 bps on YoY. This margin contraction is due to an increase in the raw material cost in the XF division. The revised increase in prices of company products has gone into effect with a time lag only by January 2022. This has affected the margin of this product segment steeply in the quarter.

Net Profit slumped 21% to Rs 246 crore on YoY. The net profit margin is 13 per cent which got contracted 400 bps on YoY.

Outlook: As the prices have stabilized and are on a recovery path the distribution channel has started working normally. The company expects good volume growth in the fourth quarter in most of its businesses. With the Covid-19 pandemic is now moving towards endemic, the company is quite optimistic of good business growth in the fourth quarter and coming years.

At 3 PM, Supreme Industries was trading at Rs 2,050, down by 3.75% down for the day. 

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