The company reported 24.7% y-o-y growth in revenue, which was driven by Rs 808.5 million contribution from sale of commercial real estate.
Supreme Industries Q2FY19 results was mixed bag. Results after adjusted for one off was ahead of estimates at topline, but was below our estimates in terms of margins. The company reported 24.7% y-o-y growth in revenue, which was driven by Rs 808.5 million contribution from sale of commercial real estate.
Adjusted for the same, the revenue for the quarter grew by 17.1% y-o-y (vs. 15.9% y-o-y growth estimates). The adjusted revenue growth was driven by 5.2% growth in volume and 11.7% y-o-y growth in realisation. The volume growth was below our estimates due to company’s focus on high value products, low volume in cross laminated films and plant shutdown in packaging segment for maintenance.
In core business, the Ebitda margin was at 13.3% and was below our estimates of 14.2% due to impact of rupee depreciation on imported raw materials, higher raw material prices due to rise in crude prices and lag effect in pass on of input cost. The company has reduced Ebitda margins guidance for FY19E by 100 bps to 14.5-15%.
The company is positive on demand of its products and expects value driven growth in the coming years. We have marginally reduced FY19E & FY20E estimates based on lower volume assumptions. The stock is presently trading at PE of 28.3x and 22.9x on FY19E and FY20E revised EPS of `34.9 and `43 per share, respectively. We upgrade our rating on the stock to ‘Buy’ with revised target price of `1,205 (vs. `1,324), valuing the stock at 28x (vs. 29x) on FY20E earnings. SIL reported 24.7% y-o-y growth in revenue, which was driven by `808.5 mn contribution from sale of 38,718 sq.ft of real estate. Adjusted for the same the revenue for the quarter grew 17.1% y-o-y (vs 15.9% y-o-y growth estimates).