Agri pipes sales hit at Supreme due to second wave; long term prospects excellent due to rural demand and pick up in construction; share of value added products moving up

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Supreme Industries is India’s leading plastic processor and a consistent performer with very high return ratios. It is present in several categories with plastic piping products contribution to revenues being the highest (>60%). Normally, plastic consumption grows at 1.4 times GDP growth rate because of which Supreme has been consistently growing for the past several years. Fluctuation in raw material prices impacts profit margins. We have a neutral rating on the stock keeping in mind its present valuation and growth potential. The company’s near term performance had been subdued as the second wave hit the agri pipes demand during peak season, however other value added products gained traction. Share of value added products has also been gradually improving through new product launches. The management has a sound capital allocation policy – 20-07-21 Price: 2104.00 Rating Neutral Recommendation: Hold

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