Shares of Supreme Industries Ltd. saw a significant jump of 4.13% in Monday's trading session, hitting a high of ₹3,592.75 apiece on the BSE. This surge follows an upward revision in the target price by ICICI Securities, which cited robust demand in the company's pipes business, stabilizing PVC prices, and consistent margins.
Brokerage Maintains 'Buy' Rating
ICICI Securities has reaffirmed its 'Buy' rating for Supreme Industries, elevating its target price to ₹4,035 per share from the previous ₹3,938. The brokerage's optimistic outlook stems from recent interactions with the company's management, who anticipate a rebound in agricultural demand starting from late September as PVC prices stabilize.
Pipe Demand and PVC Price Recovery
Supreme Industries experienced a notable recovery in pipe volumes during the second quarter of FY27, contrasting with a 15.4% year-on-year decline in the first quarter. This recovery is largely attributed to improving PVC prices, which began to strengthen after the re-imposition of Basic Customs Duty (BCD) on July 16 and the introduction of a Minimum Import Price (MIP) on July 24.
PVC prices have reportedly increased by 16.3% in the second quarter of FY27 to date, prompting distributors to restock after significant destocking activities in the preceding quarter. Management projects achieving year-on-year pipe volume growth for the first half of FY27, implying a substantial growth of at least 19% in the second quarter.
Margin Stability and Future Projections
The brokerage notes that Supreme Industries is poised for near-term margin tailwinds. The establishment of a floor for PVC prices due to the MIP is expected to help normalize channel inventory levels, supporting overall profitability by mitigating inventory losses.
For FY27, Supreme Industries has guided for a blended operating profit margin between 14% and 14.5%. ICICI Securities, however, has modeled slightly higher margins, projecting 14.7% for FY27 and 14.8% for FY28. The brokerage anticipates the company will benefit from a robust housing market, a resurgence in the agricultural sector, and greater clarity on PVC price trends post-MIP. ICICI Securities forecasts an annual EBITDA growth of 16.4% and profit after tax growth of 20.8% for Supreme Industries between FY26 and FY28.