JM Financial has initiated coverage on Supreme Industries with a ‘Buy’ rating and a target price of Rs 5,400. This implies an upside of 26.4% from the current levels. Interestingly, the target price also indicates a 25% premium to the last five-year average price for the stock.
Supreme Industries is one of India’s largest and most diversified plastics companies. It is a key player in the plastic pipes industry through scale, innovation, and aggressive yet disciplined expansion.
JM Financial on Supreme Industries: Operates over 30 units
The company operates more than 30 plants with 946kt (kilo tonne) of piping capacity, which is almost double compared to its closest peer. A pan-India footprint, scale-driven cost efficiencies, and a strong distribution network with 14,500 SKUs enable deep market penetration and reinforce its competitive edge.
JM Financial on Supreme Industries: Aggressively increasing capacity
JM Financial stated that Supreme Industries has emerged as one of the most aggressive players in the industry over the past 2-3 years. The company’s capacity is set to cross 1mt (metric tonne) by FY26, while it has already doubled its piping capacity in the past 5 years. “With SI guiding for 15-17% piping volume growth in FY26, its scale, expansion and market leadership underpin a strong growth story,” said JM Financial.
JM Financial on Supreme Industries: Strong balance sheet strength to fund capex
JM Financial said that it estimates the company will target a sector-leading capex of Rs 2,900 crore over FY25–28. This will be funded by strong operating cash flow (Rs 5,000 crore) while maintaining a net cash balance sheet. A lean working capital cycle (35–40 days) and robust return ratios (over 20% with an average dividend payout of 35% in the past 5 years) highlight financial discipline. Though returns may moderate amid expansion, they are expected to stay healthy and well above the cost of capital (more than 18%) in the coming years.