India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private...

27
Akhil Parekh [email protected] +91 22 6164 8519 Global Markets Research Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach Supreme Industries (SIL), a pioneer in the plastics pipe industry in India, remains one of the country’s largest plastic processors with annual sales volume of more than 0.4mn tonnes. SIL has one of the most diversified revenue models among peers with a product portfolio across five verticals. The company’s manufacturing base spans across 25 plants with presence in 10 states and a union territory. SIL continues to enjoy the largest share of the plastics piping and fittings segment with a ~9% market share as on FY18. Apart from this, the company remains one of the market leaders in plastic furniture, packaging products and industrial product segments with a market share of 11%, 26% and 13%, respectively. Despite increased competition from the organized and unorganized firms, SIL has posted a sales CAGR of 14%, an EBITDA CAGR of 19% and a PAT CAGR of 23% with a book value CAGR of 21% over FY08-18. Value creation: consistent increase in value-added products Through technical collaborations with global innovators, SIL has consistently improved all its product segments. As a result, sales contribution from value-added products (VAP) increased from 29.8% in FY12 to 35.9% in FY18. The company posted a VAP sales CAGR of 13% over the same period. We expect contribution of VAP (EBITDAM: >17%) to total sales to remain at 35%+ until FY21E, allowing SIL to maintain a margin level of 15%+ over the next three years. Visible growth drivers: strong capex to drive medium-term growth As on FY18, total capacity stands at 568,000 tonnes with plastics piping systems capacity of 402,000 tonnes, packaging of 65,000 tonnes, industrial of 69,000 tonnes, consumer of 29,000 tonnes and composite cylinders of 3,000 tonnes. Over FY19-21E, we expect capacity to reach 700,000 tonnes, incurring capex of INR 11,000mn. Valuation We initiate coverage of Supreme Industries with a Buy rating and a 12- month target price of INR 1,537, implying 29% upside from the current levels. Our TP is based on 30x FY21E EPS of INR 51. Our one-year forward target multiple of 30x is at par with its five-year P/E median of 30x and at a 12% discount to the company’s three-year P/E median of 34x. The stock currently trades at 31x FY19E P/E, 28x FY20E P/E and 23x FY21E P/E. In our view, a company with ex-cash ROCE of 24% (likely to reach 26.6% in FY21E), D/E of 0.1x (likely to reach 0.03x in FY21E) and a book value CAGR of 17% in the past five years and 21% in the past 10 years (likely a 19% CAGR by FY21E) trading at 23x FY21E P/E presents a good buying opportunity. Price performance Source: Bloomberg Key Financials YE March Revenue (INR mn) YoY (%) EBITDA (INR mn) EBITDA margin (%) Adj PAT (INR mn) YoY (%) Fully DEPS (INR) RoE (%) RoCE (%) P/E (x) EV/EBITDA (x) FY18 49,663 11.3 7,871 15.8 4,311 0.7 33.9 24.0 20.3 35.1 19.2 FY19E 56,696 14.2 8,674 15.3 4,879 13.2 38.4 23.4 19.5 31.0 17.2 FY20E 64,568 13.9 10,073 15.6 5,333 9.3 42.0 21.6 19.9 28.4 14.6 FY21E 74,207 14.9 11,873 16.0 6,480 21.5 51.0 22.2 20.9 23.4 12.1 Note: pricing as on 28 December 2018; Source: Company, Elara Securities Estimate India | Containers & Packaging 31 December 2018 Initiating Coverage Supreme Industries Rating: Buy Target Price: INR 1,537 Upside: 29% CMP: INR 1,191 (as on 28 December 2018) Key data Bloomberg /Reuters Code SI IN/SUPI.BO Current /Dil Shares O/S (mn) 127/127 Mkt Cap (INR bn/USD mn) 152/2,174 Daily Volume (3M NSE Avg) 90,023 Face Value (INR) 2 1 USD= INR 69.9 Note: *as on 28 December 2018; Source: Bloomberg Price & Volume Source: Bloomberg Shareholding (%) Q3FY18 Q4FY18 Q1FY19 Q2FY19 Promoter 49.7 49.7 49.7 49.7 Institutional Investor 29.1 29.2 28.5 29.2 Other Investor 4.2 4.4 5.2 4.5 General Public 17.0 16.7 16.6 16.6 Source: BSE India Price performance (%) 3M 6M 12M Sensex (0.4) 1.8 5.9 Supreme Industries 18.9 5.8 (7.5) Astral Poly Technik 17.4 16.0 39.2 Source: Bloomberg 70 80 90 100 110 120 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Rebased to 100 Supreme Industries Sensex 0 1 2 3 800 1,000 1,200 1,400 1,600 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Vol. in mn (RHS) Supreme Industries (LHS)

Transcript of India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private...

Page 1: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Akhil Parekh • [email protected] • +91 22 6164 8519

Glo

ba

l M

ark

ets

Re

sea

rch

Elara Securities (India) Private Limited

Juggernaut

Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries (SIL), a pioneer in the plastics pipe industry in India,

remains one of the country’s largest plastic processors with annual sales

volume of more than 0.4mn tonnes. SIL has one of the most diversified

revenue models among peers with a product portfolio across five

verticals. The company’s manufacturing base spans across 25 plants

with presence in 10 states and a union territory. SIL continues to enjoy

the largest share of the plastics piping and fittings segment with a ~9%

market share as on FY18. Apart from this, the company remains one of

the market leaders in plastic furniture, packaging products and

industrial product segments with a market share of 11%, 26% and 13%,

respectively. Despite increased competition from the organized and

unorganized firms, SIL has posted a sales CAGR of 14%, an EBITDA

CAGR of 19% and a PAT CAGR of 23% with a book value CAGR of 21%

over FY08-18.

Value creation: consistent increase in value-added products

Through technical collaborations with global innovators, SIL has

consistently improved all its product segments. As a result, sales

contribution from value-added products (VAP) increased from 29.8% in

FY12 to 35.9% in FY18. The company posted a VAP sales CAGR of 13%

over the same period. We expect contribution of VAP (EBITDAM: >17%)

to total sales to remain at 35%+ until FY21E, allowing SIL to maintain a

margin level of 15%+ over the next three years.

Visible growth drivers: strong capex to drive medium-term growth

As on FY18, total capacity stands at 568,000 tonnes with plastics piping

systems capacity of 402,000 tonnes, packaging of 65,000 tonnes,

industrial of 69,000 tonnes, consumer of 29,000 tonnes and composite

cylinders of 3,000 tonnes. Over FY19-21E, we expect capacity to reach

700,000 tonnes, incurring capex of INR 11,000mn.

Valuation We initiate coverage of Supreme Industries with a Buy rating and a 12-

month target price of INR 1,537, implying 29% upside from the current

levels. Our TP is based on 30x FY21E EPS of INR 51. Our one-year

forward target multiple of 30x is at par with its five-year P/E median of

30x and at a 12% discount to the company’s three-year P/E median of

34x. The stock currently trades at 31x FY19E P/E, 28x FY20E P/E and

23x FY21E P/E. In our view, a company with ex-cash ROCE of 24%

(likely to reach 26.6% in FY21E), D/E of 0.1x (likely to reach 0.03x in

FY21E) and a book value CAGR of 17% in the past five years and 21%

in the past 10 years (likely a 19% CAGR by FY21E) trading at 23x FY21E

P/E presents a good buying opportunity.

Price performance

Source: Bloomberg

Key Financials YE

March

Revenue

(INR mn)

YoY

(%)

EBITDA

(INR mn)

EBITDA

margin (%)

Adj PAT

(INR mn)

YoY

(%)

Fully DEPS

(INR)

RoE

(%)

RoCE

(%)

P/E

(x)

EV/EBITDA

(x)

FY18 49,663 11.3 7,871 15.8 4,311 0.7 33.9 24.0 20.3 35.1 19.2

FY19E 56,696 14.2 8,674 15.3 4,879 13.2 38.4 23.4 19.5 31.0 17.2

FY20E 64,568 13.9 10,073 15.6 5,333 9.3 42.0 21.6 19.9 28.4 14.6

FY21E 74,207 14.9 11,873 16.0 6,480 21.5 51.0 22.2 20.9 23.4 12.1

Note: pricing as on 28 December 2018; Source: Company, Elara Securities Estimate

India | Containers & Packaging 31 December 2018

Initiating Coverage

Supreme Industries

Rating: Buy Target Price: INR 1,537

Upside: 29%

CMP: INR 1,191 (as on 28 December 2018)

Key data

Bloomberg /Reuters Code SI IN/SUPI.BO

Current /Dil Shares O/S (mn) 127/127

Mkt Cap (INR bn/USD mn) 152/2,174

Daily Volume (3M NSE Avg) 90,023

Face Value (INR) 2

1 USD= INR 69.9

Note: *as on 28 December 2018; Source: Bloomberg

Price & Volume

Source: Bloomberg

Shareholding (%) Q3FY18 Q4FY18 Q1FY19 Q2FY19

Promoter 49.7 49.7 49.7 49.7

Institutional Investor 29.1 29.2 28.5 29.2

Other Investor 4.2 4.4 5.2 4.5

General Public 17.0 16.7 16.6 16.6

Source: BSE India

Price performance (%) 3M 6M 12M

Sensex (0.4) 1.8 5.9

Supreme Industries 18.9 5.8 (7.5)

Astral Poly Technik 17.4 16.0 39.2

Source: Bloomberg

70

80

90

100

110

120

Dec-17 Mar-18 Jun-18 Sep-18 Dec-18

Re

ba

sed

to

10

0

Supreme Industries Sensex

0

1

2

3

800

1,000

1,200

1,400

1,600

Dec-17 Mar-18 Jun-18 Sep-18 Dec-18

Vol. in mn (RHS) Supreme Industries (LHS)

Page 2: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

2 Elara Securities (India) Private Limited

Valuation trigger

Source: Bloomberg, Elara Securities Estimate

Valuation overview

Year FY21E

EPS (INR) 51

One-year forward P/E median (three-year average) (x) 34

One-year forward P/E median (five-year average) (x) 30

One-year forward P/E median (eight-year average) (x) 24

Current market cap (INR mn) 151,334

No of shares (mn) 127

Target multiple (x) 30

TP (INR) 1,537

CMP (INR) 1,191

Upside (%) 29

Note: pricing as on 28 December 2018; Source: Elara Securities Estimate

Valuation driver

FY18 FY19E FY20E FY21E

P/E (x) 35.1 31.0 28.4 23.3

EV/EBITDA (x) 19.2 17.2 14.6 12.1

EV/Sales (x) 3.0 2.6 2.3 1.9

ROE (%) 24.0 23.4 21.6 22.2

ROCE (%) 20.3 19.5 19.9 20.9

Ex-cash ROCE (%) 23.6 22.9 24.2 26.6

Dividend payout (%) 42.6 41.7 41.7 40.2

Source: Company, Elara Securities Estimate

Investment summary

Growth drivers, such as PMAY, Swachh

Bharat and Smart City Mission, are likely

to drive a plastics piping systems volume

CAGR of 9% over FY18-21E

Derisked business model with five

verticals: plastics piping systems,

packaging, industrial, & consumer

products and composite cylinders

Strong cashflow-generating business

model; allows healthy dividend payout

ratio of ~40% of PAT

Valuation trigger

1. Healthy capex in pipeline with likely

investment of ~INR 1,100mn over the

next three years

2. Margin to expand by 100bp by FY21E

over 1HFY19 (margin at 15.0%) with

35%+ contribution from VAP

Key risks

Slowdown in government initiatives,

poor Monsoon or slower construction

activities can negatively impact plastics

piping systems segment’s volume CAGR

of 9% over FY18-21E

Sharp rise in crude prices will negatively

affect PVC resin prices and overall

margin

Our assumptions

Volume CAGR of 9% over FY18-21E

Increase in price realization of 5% over

FY18-21E, led by improving product mix

in industrial products

EBITDA margin improvement to 16.0%

by FY21E from 15.0% in 1HFY19

1

2

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

De

c-1

7

Fe

b-1

8

Ap

r-1

8

Jun

-18

Au

g-1

8

Oct

-18

De

c-1

8

Fe

b-1

9

Ap

r-1

9

Jun

-19

Au

g-1

9

Oct-

19

De

c-1

9

Margin to expand by 100bp over 1HFY19 (margin at

15.0%) with 35%+ contribution from VAP

Healthy capex in pipeline with likely investment of ~INR 1,100mn over the

next three years

Page 3: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

Co

nta

ine

rs &

Pa

ck

ag

ing

3 Elara Securities (India) Private Limited

Financials (YE March) Income Statement (INR mn) FY18 FY19E FY20E FY21E

Net Revenues 49,663 56,696 64,568 74,207

EBITDA 7,871 8,674 10,073 11,873

Add:- Non operating Income 48 75 90 140

OPBIDTA 7,919 8,749 10,163 12,013

Less :- Depreciation & Amortization 1,672 1,938 2,193 2,387

EBIT 6,247 6,812 7,970 9,626

Less:- Interest Expenses 219 200 150 105

PBT 6,028 7,171 7,820 9,521

Less :- Taxes 2,057 2,462 2,682 3,266

Adjusted PAT 3,971 4,709 5,137 6,255

Add/Less: - Extra-ordinaries - - -

Reported PAT 4,311 4,879 5,333 6,480

Balance Sheet (INR mn) FY18 FY19E FY20E FY21E

Share Capital 254 254 254 254

Reserves 18,695 22,497 26,472 31,285

Borrowings 2,324 1,824 1,324 824

Deferred Tax (Net) 1,134 1,229 1,331 1,455

Total Liabilities 22,549 25,946 29,523 33,817

Gross Block 25,883 30,009 33,959 36,959

Less:- Accumulated Depreciation 12,225 14,163 16,356 18,743

Net Block 13,658 15,846 17,603 18,216

Add:- Capital work in progress 626 450 509 554

Investments 2,476 2,476 2,476 2,476

Net Working Capital 5,789 7,174 8,935 12,571

Other Assets - - - -

Total Assets 22,549 25,946 29,523 33,817

Cash Flow Statement (INR mn) FY18 FY19E FY20E FY21E

Cash profit adjusted for non cash items 5,725 6,366 7,631 8,977

Add/Less : Working Capital Changes (937) 112 (721) (879)

Income Taxes paid 2,057 2,462 2,682 3,266

Operating Cash Flow 2,731 4,016 4,228 4,832

Less:- Capex (2,855) (3,950) (4,009) (3,045)

Free Cash Flow (125) 66 218 1,787

Financing Cash Flow (283) (500) (500) (500)

Net change in Cash (438) 1,497 1,039 2,757

Ratio Analysis FY18 FY19E FY20E FY21E

Income Statement Ratios (%)

Revenue Growth 11.3 14.2 13.9 14.9

EBITDA Growth 3.3 10.2 16.1 17.9

PAT Growth 0.7 13.2 9.3 21.5

EBITDA Margin 15.8 15.3 15.6 16.0

Net Margin 8.7 8.6 8.3 8.7

Return & Liquidity Ratios

Net Debt/Equity (x) 0.1 0.1 0.0 0.0

ROE (%) 24.0 23.4 21.6 22.2

ROCE (%) 20.3 19.5 19.9 20.9

Per Share data & Valuation Ratios

Diluted EPS (INR/Share) 33.9 38.4 42.0 51.0

EPS Growth (%) 0.7 13.2 9.3 21.5

DPS (INR/Share) 14.4 20.0 17.5 20.5

P/E Ratio (x) 35.1 31.0 28.4 23.4

EV/EBITDA (x) 19.2 17.2 14.6 12.1

EV/Sales (x) 3.0 2.6 2.3 1.9

BVPS (INR) 149 179 210 248

Price/Book (x) 8.0 6.7 5.7 4.8

Dividend Yield (%) 1.2 1.3 1.5 1.7

Note: pricing as on 28 December 2018; Source: Company, Elara Securities Estimate

Revenue & margin growth trend

Source: Company, Elara Securities Estimate

Adjusted profit growth trend

Source: Company, Elara Securities Estimate

Return ratios

Source: Company, Elara Securities Estimate

15.8

15.3

15.6

16.0

14.5

15.0

15.5

16.0

16.5

30,000

40,000

50,000

60,000

70,000

80,000

FY18 FY19E FY20E FY21E

(%)

(IN

R m

n)

Net Revenues EBITDA Margin

0.7

13.2

9.3

21.5

0

5

10

15

20

25

3,000

4,000

5,000

6,000

7,000

FY18 FY19E FY20E FY21E

(%)

(IN

R m

n)

Adjusted PAT PAT Growth

24.023.4

21.622.2

20.319.5 19.9

20.9

15

17

19

21

23

25

FY18 FY19E FY20E FY21E

ROE (%) ROCE (%)

Page 4: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

4 Elara Securities (India) Private Limited

Pan-India actor

Well-entrenched national brand

Starting from two tin shed establishments at Wadala and

Naigaum in Mumbai with shareholder equity of INR

1.7mn, SIL has come a long way. In the past six decades,

the company has set up 25 manufacturing plants in 10

States and Union territories with a wide distribution

network comprising 3,303 distributors. During FY08-18,

SIL’s gross block had expanded at a CAGR of 12%. The two

key parameters for a company to succeed in this industry

are a pan-India presence and a wide distribution network.

SIL scores well on both parameters.

Widening distribution network

SIL has invested consistently in widening its distribution

reach. It has extended its reach and strengthened its

distribution network at a CAGR of 10% over FY13-18.

When SIL was been unable to find distributors to buy and

stock products for redistribution through the retail chain

in an area, the company has sold products directly to big

retailers there. It has strengthened its supply chain to

service those retailers in a cost-efficient manner.

Strongest manufacturing base among peers

SIL has the widest reach among peers (Ashirvad Pipes

[Not Listed], Astral Poly [ASTRA IN, CMP: INR 1,155, Not

Rated], Finolex Industries [FNXP IN, CMP: INR 553, Not

Rated], Jain Irrigation [JI IN, CMP: INR 69, Not Rated] and

Prince Pipes [Not Listed]). SIL has plants across the

country. In North India, the company has units in Punjab

and Uttar Pradesh. In West India, it has factories in Dadra

& Nagar Haveli, Rajasthan, Gujarat, Maharashtra and

Madhya Pradesh. In South India, it has plants in Tamil

Nadu and Puducherry while in East India SIL has capacity

built at Assam and West Bengal. SIL has two upcoming

units in Assam and Telangana.

Making of plastics conglomerate

Pan-India distribution with manufacturing base across India

Well-diversified product portfolio across five verticals

Strong technical collaborations with MNC

Exhibit 1: Increase in distribution reach across segments

Plastics piping systems Consumer products - furniture Packaging products

Industrial products - materials

handling

SIL total distribution reach

Source: Company, Elara Securities Research

500

600

700

800

900

1,000

1,100

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

(no

)

500

600

700

800

900

1,000

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

(no

)

500

600

700

800

900

1,000

1,100

1,200

1,300F

Y1

3

FY

14

FY

15

FY

16

FY

17

FY

18

(no

s.)

100

150

200

250

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

(no

s.)

2,0

51

2,2

57

2,4

09

2,7

51

2,9

73

3,3

03

1,500

2,000

2,500

3,000

3,500

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

(no

s.)

Supreme Industries

Page 5: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

Co

nta

ine

rs &

Pa

ck

ag

ing

5 Elara Securities (India) Private Limited

Exhibit 3: Peer pan-India manufacturing base

Company States #Distributors #Touch points

Supreme Industries

Punjab, Uttar Pradesh, Dadra and Nager Haveli, Rajasthan, Maharashtra, Madhya Pradesh, Tamil Nadu, Puducherry, Assam and West Bengal

3,303 984 for plastic pipes

25,000

Astral Poly Maharashtra, Gujarat, Tamil Nadu, Rajasthan, Uttarakhand and UP

2,550 750 for plastic pipes, 1,800 for adhesive

28,000

Finolex Industries

Maharashtra and Gujarat

800

22,000

Prince Pipes

Maharashtra, Tamil Nadu, Uttarakhand, Dadra and Nagar Haveli

750

NA

Ashirwad Pipes

Karnataka 1,100

36,000

Note; FY18, Source: Company, Elara Securities Research

Diversified product portfolio

SIL has one of the most diversified product portfolios

among peers. A well-diversified product portfolio has

reduced the risk relating to its performance and its

dependence on a particular end-user industry in any year.

The company operates in four segments: plastic pipes,

packaging products, industrial products, consumer

products and composite cylinders.

Offers widest range of SKU across categories

In the plastics piping segment, SIL offers 7,833 products as

on FY18 (addition of 603 products during FY18) for 29

different applications. It is the only company which offers

pipes and fittings from major polymers, such as PVC,

CPVC, PE and PPR. SIL is a leader in this segment with

12.5% of the organized domestic plastics piping segment

and 8.65% of the overall plastics piping segment. Major

competitors in the plastics piping segment are Ashirvad

Pipes, Astral Poly, Finolex Industries, Jain Irrigation and

Prince Pipes.

In the packaging segment, the company has three sub-

segments: specialty films, protective packaging products &

cross laminated films. In the consumer products segment,

SIL offers furniture primarily used in households and

offices. Major firms in the consumer products space are

Nilkamal and Wim Plast.

In the industrial products segment, SIL has two sub-

segments: industrial components (consumer appliances &

automobile components) and materials handling system

(crates, pallets & garbage bins). Maruti Suzuki India,

Honda, Piaggio and Whirlpool India are some big clients

in industrial components sub segment. The materials

handling division has products, such as crates for

industrial, retailing, warehousing dairy, fishery, fruit &

vegetable vending entities, bottle crates for soft drink and

beverage industry, pallets for warehousing, roto moulded

crates and garbage bins.

Exhibit 2: A diversified product portfolio as on FY18

Supreme Industries Astral Poly Finolex Industries

Prince Pipes Ashirvad Pipes

Source: Company, Elara Securities Research

Plastics Piping

Systems55%

Packaging Products

21%

Industrial 16%

Consumer7%

Composite1%

Piping74%

Adhesives26%

PVC42%

Pipes and Fittings

55%

Power3%

Pipes and Fittings100%

Pipes & Fittings100%

Page 6: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

6 Elara Securities (India) Private Limited

As part of the new initiative, SIL had forayed into

composite cylinders in FY12-13. Some clients include the

Bangladesh government, South Korea government, and

Hindustan Petroleum Corporation or HPCL (educational

orders as on now). A major competitor in the composite

cylinders segment is Time Technoplast (TIME IN, CMP; INR

100, Not Rated).

A diversified product portfolio catering to different

industries has helped SIL to reduce volatility in EBITDA

margins. The company’s EBITDA margin is less lumpy than

peers as indicated by the low variance.

Exhibit 4: Comprehensive portfolio of value-added products

Business vertical Product portfolio Targeted customer segment

Plastics piping systems

uPVC pipes, injection moulded fittings, handmade fittings, polypropylene random, co-polymer pipes & fittings, HDPE pipe systems, CPVC pipe systems, inspection chambers, water tanks, septic tanks, toilets, DWC HDPE pipe systems, bath fittings, solvents

Potable water supply Irrigation Sewage & drainage

Plumbing & sanitation Industrial pipe system Fire sprinkler system

Consumer products Furniture Household Office establishments Institutions

Industrial products Industrial components Materials handling products (crates, pallets, bins & dustbins)

Auto sector Electronic household

appliances

Water purification – filters

Soft drink companies Agriculture & fisheries

Packaging products Specialty films Protective packaging, cross-laminated film and cross-line bonded film products

Electronics Food industry Sports goods Insulation Construction Agriculture

Floriculture Horticulture Grain storage Tarpaulin Pond lining

Composite products LPG cylinders Retail / Household

Source: Company, Elara Securities Research

Exhibit 5: Well-diversified portfolio leads to the least margin variance among peers

Supreme Industries Astral Poly

Prince Pipes Finolex Industries

Source: Company, Elara Securities Research

14.5

15.0

15.5

16.0

16.5

17.0

17.5

FY13 FY14 FY15 FY16 FY17 FY18

Margin variance: 0.5%

10

11

12

13

14

15

16

FY13 FY14 FY15 FY16 FY17 FY18

Margin variance: 1.6%

6

8

10

12

14

FY13 FY14 FY15 FY16 FY17

Margin variance: 3.3%

5

10

15

20

25

FY13 FY14 FY15 FY16 FY17 FY18

Margin variance: 18.1%

Page 7: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

Co

nta

ine

rs &

Pa

ck

ag

ing

7 Elara Securities (India) Private Limited

Market leader in a plastics piping segment

SIL is a market leader in the plastics piping segment with

total capacity of ~400,000 tonnes. Although the plastics

piping segment has been in a fierce competition with

several regional and national firms, the organized

segment is dominated by only six companies; Supreme

Industries, Finolex, Astral Poly, Prince Pipes, Ashirvad Pipes

and Jain Irrigation. SIL’s corporate presentation states

total market size of domestic plastic pipes is ~INR

315,000mn, with 70% of the market captured by

organized firms and the rest by unorganized entities.

These six companies make up ~40% of total market.

Currently, SIL holds a 13% share in the organized plastics

piping segment and 9% in total pipes segment in India.

The company has been able to retain its leadership

position by continuing to expand its distribution channel

and retail touch points. As on FY18, SIL has 984 channel

partners with more than 25,000+ retail touch points. Also,

the company has expanded its product portfolio. As on

FY18, SIL had 7,833 products for 29 different application

systems. It is the only company in India supplying pipes

and fittings manufactured from all major polymers — PVC,

CPVC, PE and PPR.

Exhibit 6: Consistent addition of SKU & distribution

channel in plastic piping systems segment

Source: Company, Elara Securities Research

Exhibit 7: Stable operating margin of 14-15% for the

plastics piping systems segment

Source: Company, Elara Securities Research

5,800

6,156

6,500

6,800

7,300

7,833

600

700

800

900

1,000

1,100

5,000

5,500

6,000

6,500

7,000

7,500

8,000

FY13 FY14 FY15 FY16 FY17 FY18

(no

s)(no

s)

SKUs Distributors

17

,02

0

20

,60

1

21

,12

5

16

,05

3

25

,53

1

27

,27

2

16.0

15.0

13.4

14.2

15.5

14.1

12

13

14

15

16

17

5,000

10,000

15,000

20,000

25,000

30,000

FY13 FY14 FY15 FY16 FY17 FY18

(%)

(IN

R m

n)

Sales EBITDAM

India’s plastic pipes industry (INR 315,000mn)

Organized (70%)

Unorganized (30%)

Supreme Industries

(INR 27,000mn)

Astral Poly (INR

15,000mn)

Ashirvad Pipes (INR 24,000mn)

Prince Pipes (INR

12,600mn)

Finolex Industries

(INR 22,501mn)

Jain Irrigation

(INR 18,000mn)

Note: FY18, Source: Company, Elara Securities Research

Exhibit 8: Annual turnover of India’s plastic pipe industry

Page 8: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

8 Elara Securities (India) Private Limited

Packaging products: margin-accretive business

SIL makes specialty films, protective packaging products

and cross-laminated film products. The company has tie-

ups with global industry leaders, thereby giving it access

to the latest technology and innovations. Despite

increased competition from new and existing firm, SIL has

been able to retain its customer base and grow at a

moderate pace of CAGR 6% (volume wise) over FY13-18,

because of the high quality of its products and servicing

standards. In the specialty films segment, SIL sells high

value-added products, such as high gloss &

thermoforming films and pouches as well as bulk bags.

Exhibit 9: Packaging products contributes one-fifth to

overall sales

Source: Company, Elara Securities Research

Exhibit 10: Packaging products contributes one-third

to overall EBITDA

Source: Company, Elara Securities Research

Exhibit 11: Protective packaging is 10% of total sales

Source: Company, Elara Securities Research

SIL is among market leaders in the protective packaging

segment with around 26% market share. In this segment,

the company primarily caters to packaging, civil and

insulation sectors. New applications and strong focus on

product development have kept other firms at bay.

Several unorganized companies operate in this space,

which are unable to compete with SIL in terms of quality

and servicing standards. Protective packaging contributes

~45% to SIL’s packaging business and ~9% to overall

business.

Exhibit 12: SIL maintains market leadership in the

protective packaging space

Source: Company, Elara Securities Research

SIL has lion’s share of 30% in the expanded polyethylene

(EPE) foam. India’s EPE foam market stands at INR

8,000mn as per SIL corporate presentation.

Exhibit 13: EPE foam a major contributor to protective

packaging

Source: Company, Elara Securities Research

SIL is the only company in India that has the technology

to manufacture cross-laminated films, according to the

management. It sells this product under the brand,

Silpaulin. Similar to protective packaging and packaging

films, there are several unorganized firms which operate

in this segment in India. With the Goods and Services Tax

(GST) rollout, we believe SIL will be able to capture market

share from these firm. It also has made a maiden entry in

the US market by sending its first consignment of

43 44 47 52 55 53 55 55 55

24 24 24 21 22 23 23 22 21

0

20

40

60

80

100

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

(%)

Plastic pipes Packaging Industrial Consumer Composite

36 36 42 52 57 49 49 52 50

32 35 32

27 27

30 32 29 27

0

20

40

60

80

100

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

(%)

Plastic pipes Packaging Industrial Consumer Composite

6

7

8

9

10

11

12

13

14

30

35

40

45

50

55

60

FY13 FY14 FY15 FY16 FY17 FY18

(%)

(%)

% of SIL packaging % of total SIL (RHS)

30

27 26

24

25

26

20

22

24

26

28

30

32

FY13 FY14 FY15 FY16 FY17 FY18

(%)

Protective packaging as a % of market share

47 52 53 53 54 52

0

20

40

60

80

100

FY13 FY14 FY15 FY16 FY17 FY18

(%)

Nitrilile PVC Rubber foam

Cross linked foam rolls (Chemicals)

Cross linked foam (Block)

Air Bubble film

EPE Foam

Page 9: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

Co

nta

ine

rs &

Pa

ck

ag

ing

9 Elara Securities (India) Private Limited

tarpaulins in March 2017 to an US entity, which will sell

Silpaulin through online websites. The company is

negotiating with retail chain stores in the US to sell

Silpaulin from stores and through online websites. SIL also

has entered new markets, such as the UK, Denmark and

Australia.

SIL has been able to create an entry barrier in this segment

by patenting its technology. Apart from this, the company

has been able to develop several additional fabricated

applications other than tarpaulin from the film which has

enabled it to capture market share from incumbent

companies.

Consumer products: good diversification from core

SIL is the second-largest firm in this segment with current

processing capacity of 29,000 tonnes. The company has

an 12% market share in the INR 30,000mn plastics

furniture industry. It manufactures injection moulded and

blow moulded furniture with five units at Puducherry

(Union Territory), Durgapur (West Bengal), Derabassi

(Punjab), Gadegon (Maharashtra) and Guwahati (Assam).

Growth in this business can primarily be attributed to SIL’s

focus on increasing its distribution setup (currently has

900 channel partners vs. 814 in FY17) and wide

acceptance of its products in the premium segment. SIL’s

furniture is currently available through a nationwide

network of ~11,000 retailers.

The GST rates for consumer furniture were initially

decided at 28%, which led to sluggishness in furniture

sales during initial part of FY18. Later, the GST rates were

dropped from 28% to 18% which bolstered growth

during the second half of FY18 (SIL grew by 16% during

2HFY18). The Indian consumer furniture market is 30%

unorganized and 70% unorganized as per the industry

report. Post the GST rollout, we anticipate some shift to

happen from the unorganized to the organized one.

During FY18, SIL introduced seven furniture models,

including fusion series cupboards, two-seater Rattan finish

loveseat sofa and blow moulded tables.

Exhibit 14: SIL remains one of the market leaders in

plastic furniture segment

Note: FY18; Source: Company, Elara Securities Research

Exhibit 15: India’s listed plastic furniture firms’ market

share

Note; FY18: Source: Company, Elara Securities Research

Apart from the domestic market, SIL has started exploring

the international markets. During FY18, the company

started exporting to 12 countries.

Industrial products: stable B2B business segment

In the industrial products segment, SIL operates in two

sub-segments — industrial components and materials

handling. The industrial components segment primarily

caters to automobile and consumer appliances industries.

Some of its clients in the auto component space include

Tata Motors, Piaggio, Honda and Bajaj Auto. Clients in the

consumer appliances space include air conditioner or AC

manufacturers and washing machine manufacturers,

such as Whirlpool of India. During FY18, this segment

posted volume growth of 31% and value growth of 18%.

The materials handling division manufactures industrial

crates, pallets and bottle crates. Materials handling

volume grew by 18% during FY18. One key reason SIL has

been successful in this space is it has designed a crate

model to service large customers and has been successful

in obtaining a sizeable business. Management expects

sustained growth from this segment for the next few

years. Apart from crates, SIL has gained expertise in

manufacturing pallets, used especially in supply chain and

warehousing segments. SIL currently holds a 15% market

share in materials handling with a market size of INR

16,000mn.

Composite cylinders: yet another product innovation

As a part of a new initiative, SIL forayed into the composite

cylinder segment in 2012. Apart from SIL, Time

Technoplast is the other major company in India

operating in this segment. SIL currently has capacity of

3,000 tonnes (450,000 units pa) while Time Technoplast

(LiteSafe brand) has 1.4mn unit per year capacity,

according to TIME management. TIME remains the bigger

firm of two with approval from 48 countries and

supplying to 25 countries. The company also produces

the largest range of composite cylinders from 2kg to 22kg.

21,080

3,518 3,877

1,027 653

0

5,000

10,000

15,000

20,000

25,000

Nilkamal Supreme WimPlast

PrimaPlastics

NationalPlastics

(IN

R m

n)

Nilkamal70%

Supreme12%

Wim Plast13%

Prima Plastics

3%

National Plastics

2%

Page 10: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

10 Elara Securities (India) Private Limited

Entry barriers in this segment are high, given the number

of approvals required from government bodies. SIL has

received approvals from Indian unit of Germany based

Technischer Überwachungsverein (TUV), India based

Petroleum and Explosives Safety Organization (PESO) and

Korean Gas Safety (KGS). SIL’s BIS Standard is complete

and BIS 16646 has been published for Type IV composite

cylinders. This approval is a must so that (oil marketing

companies (OMC) can start procuring these composite

cylinders from it.

During FY18, SIL started supplying to South Korea and

Bangladesh. While initially there were some technical

issues, as per the management, they have been rectified.

The company has started receiving repeat orders. It also

has received positive feedback for its cylinders and started

supplying in small quantities to private gas companies in

Goa, Belgaum and Bengalaru. SIL acquired a 10% interest

stake in HPC research, a startup company based in Czech

Republic focused on R&D in composite cylinders.

Although sales contribution from this segment is small, we

believe composite cylinders have huge scope in India,

where metal cylinders will be replaced by composite

cylinders. Composite cylinders provide several benefits

over metal ones. They are lightweight, fire & UV resistant,

rust as well as corrosion-proof, aesthetically good and

easily allow customers to monitor the level of gas in the

cylinder.

Strong technical collaborations

Over the years, SIL has pursued technical collaborations

with global innovators to supplement its production

capability and cater to new applications coupled with a

low-cost manufacturing base.

Exhibit 16: Foreign technical collaborators

Company Product line

Rasmussen Polymer Development, Switzerland

Cross-laminated films

Wavin, Netherlands Plastic Piping systems

Foam Partner, Switzerland Reticulated PU foam

Sanwa Kako, Japan 2 stage foam

PE Tech, South Korea Cross-linked foam

Kumi Kasai, Japan Automotive components

Lomold (PTY), South Africa Composite pallets

Kautex GMBH, Germany Composite LPG cylinders

Spears, US Fire sprinklers pipes from CPVC

Source: Company, Elara Securities Research

SIL’s strong technical collaborations with international

firms have enabled it to introduce various path-breaking

technologies. In the plastics piping segment, the company

introduced the soil, waste and rain (SWR) drainage

system, silent pipe system, aqua gold high pressure

plumbing system, hot & cold water system, underground

drainage system, CPVC fire sprinklers, and HDPE pipe

system for sewage & drainage.

In the furniture segment, the company has been a pioneer

in lacquered and upholstered moulded plastic furniture. It

is the only company in India which has the technology to

manufacture patented cross-laminated film products

under its brand, Silpaulin. Silpaulin is one-seventh the

weight of conventional cotton tarpaulin, but also has a

high strength-to-weight ratio. The company has launched

many innovative products in India in the packaging

segment, which primarily includes reticulated foam for air

filtration, sound absorbing open cell foam, high

temperature and fire-resistant melamine foam,

waterproofing membrane made from composites of foam

products, bonded foam for acoustic insulation, floor

protector made from foam and XF film. In the industrial

products segment, SIL was the first to launch injection-

moulded plastic pallets.

Through sustained product innovation, SIL increased its

product portfolio catering to multiple industries. A strong

technical collaboration has enabled SIL to increase

contribution from value-added products (operating

margin of >17%) from 29.8% in FY12 to 36% in FY18. Sales

of these value-added products rose from INR 8,731mn to

INR 17,884mn over FY12-18, at a 12% CAGR.

Exhibit 17: Sustained sales improvement in VAP

Source: Company, Elara Securities Research

8,000

10,000

12,000

14,000

16,000

18,000

20,000

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

(IN

R m

n)

Page 11: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

Co

nta

ine

rs &

Pa

ck

ag

ing

11 Elara Securities (India) Private Limited

VAP to keep margin elevated

SIL has consistently launched products catering to niche

applications, which has led to the rise in value-added

products (as per the company, products with an

operating margin of >17% are classified as VAP).

Value-added products posted sales CAGR of 13% over

FY12-18. Sales from value-added products, as percentage

of total sales, increased from 29.82% in FY12 to 35.95% in

FY18. The entire 100% of sales from cross-laminated films

(Silpaulin) and composite cylinders fall under the VAP

category.

Exhibit 18: VAP sales CAGR of 13% over FY12-18

Source: Company, Elara Securities Research

Exhibit 19: More than a third of sales come from VAP

Source: Company, Elara Securities Research

Exhibit 20: VAP sales CAGR of 19% over FY12-18 –

plastics piping systems segment

Source: Company, Elara Securities Research

Exhibit 21: Improving contribution from VAP – plastic

piping systems segment

Source: Company, Elara Securities Research

Plastic piping systems, a major VAP contributor

Sales of value-added products from the plastics piping

systems segment consistently increased over FY12-18. Its

contribution to the segment went up from 23% in FY12 of

the plastics piping systems sales to 32% by FY18. Although

SIL’s plastic piping segment posted a sales CAGR of 13%,

sales CAGR of value-added products in the segment

posted a CAGR of 19% over FY12-18. Around 50% of SIL’s

VAP sales come from this segment.

Sales realization of the plastics piping segment posted a

CAGR of 5%, from INR 87.3/kg to INR 114.0/kg, over FY12-

18, led by improving VAP contribution. We expect the

trend to continue over FY18-21 with improvement in

realization CAGR of 3%.

8,3

48

10

,05

0

11

,86

3

13

,40

1

10

,67

1

16

,41

0

17

,34

1

0

5,000

10,000

15,000

20,000

FY12 FY13 FY14 FY15 FY16 FY17 FY18

(IN

R m

n)

29.8

31.1

32.3

34.2

36.737.5

35.9

28

30

32

34

36

38

FY12 FY13 FY14 FY15 FY16 FY17 FY18

(%)

3,0

58

4,4

00

5,5

78

6,3

22

5,3

21

7,7

83

8,6

62

0

2,000

4,000

6,000

8,000

10,000

FY12 FY13 FY14 FY15 FY16 FY17 FY18

(IN

R m

n)

23.2

26.627.7

30.3

33.4

31.7 31.8

20

25

30

35

FY12 FY13 FY14 FY15 FY16 FY17 FY18

(%)

Structural compounding story

Contribution to increase from value-added products

Capacity expansion leading to an earnings CAGR of 15% over FY18-21E

Strong free cashflow model and optimization of shareholder value

Page 12: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

12 Elara Securities (India) Private Limited

Exhibit 22: Launches in the past three years – plastics

piping systems

Category New product launches

Plastics piping SWR drainage system

Nu-drain underground drainage system

CPVC fire sprinkler

DWC HDPE sewerage and drainage

Aqua craft bath fittings

Inspection chambers and manholes

Source: Company, Elara Securities Research

Exhibit 23: VAP sales CAGR of 11% over FY12-17 –

furniture segment

Note: FY18 contribution not published by management

Source: Company, Elara Securities Research

Exhibit 24: More than half of furniture products are

VAP

Note: FY18 contribution not published by management

Source: Company, Elara Securities Research

VAP respite for moderately growing furniture space

Segments growing at pace of GDP, such as moulded

furniture, SIL has focused on delivering high quality

products and services to customers through its

nationwide network of ~11,000 retailers. Sales

contribution from value-added products in this segment

went up from 36.3% in FY12 to 52.1% in FY17 (the

company has not published FY18 numbers). It posted a

moulded furniture segment CAGR of just 5% over FY12-

18 while it had a VAP sales CAGR of 11% over FY12-17

(the company has not published FY18 numbers). Sales

realization of moulded furniture for SIL has moved up

from INR 142/kg in FY12 to INR 178/kg in FY18 (INR

195/kg in 1HFY19).

Exhibit 25: Launches in the past three years - Furniture

Category New product launches

Consumer products - furniture Blow moulded tables

Fusion series tables

Two-seater love seat sofa

Cambridge chair

Vegas centre table

Source: Company, Elara Securities Research

Packaging products: second-biggest contributor

The protective packaging VAP business (sub-segment

under packaging) posted a sales CAGR of 15% over FY12-

17, with VAP contribution increasing from 36.0% in FY12

to 44.2% in FY17. With improving VAP contribution, sales

realization for the packaging vertical improved from INR

183.8/kg in FY12 to INR 216.4/kg in FY18, at a sales CAGR

of 3%.

Exhibit 26: VAP sales CAGR of 15% over FY12-17–

protective packaging segment

Note: FY18 contribution not published by management

Source: Company, Elara Securities Research

Exhibit 27: Improving trend of VAP – protective

packaging segment

Note: FY18 contribution not published by management

Source: Company, Elara Securities Research

Within the packaging business, cross-laminated film (sold

under brand, Silpaulin) is a 100% value-added product.

The cross-laminated film business posted a sales CAGR of

6% over FY12-17 (the company has not published FY18

numbers).

95

2

1,0

52

1,2

55

1,3

11

1,0

43

1,6

32

600

800

1,000

1,200

1,400

1,600

1,800

FY12 FY13 FY14 FY15 FY16 FY17

(IN

R m

n)

36.338.2

48.6 47.6 48.3

52.1

20

25

30

35

40

45

50

55

FY12 FY13 FY14 FY15 FY16 FY17

(%)

Moulded Furniture - VAP

85

2

90

1

97

6

1,0

40

85

1

1,6

92

0

500

1,000

1,500

2,000

FY12 FY13 FY14 FY15 FY16 FY17

(IN

R m

n)

36.035.2

31.730.4

32.7

44.2

30

35

40

45

FY12 FY13 FY14 FY15 FY16 FY17

(%)

protective packaging - VAP

Page 13: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

Co

nta

ine

rs &

Pa

ck

ag

ing

13 Elara Securities (India) Private Limited

Exhibit 28: Cross-laminated film packaging – 100%

VAP segment

Note: FY18 contribution not published by management

Source: Company, Elara Securities Research

Exhibit 29: Launches in the past three years –

Packaging Products

Category New product launches

Packaging Kids education toys

Yoga mats (approved vendor, Decathlon)

NBR sheets

Bonded foam for acoustic insulation

Source: Company, Elara Securities Research

Composite cylinders: 100% VAP segment

SIL has been trying to scale up its composite cylinders

business for the past few years. The company started

supplying composite cylinders to South Korea and

Bangladesh during FY18. However, as per management,

clients had reported few technical issues in the product. It

says all those issues have been resolved and clients have

to issue repeat orders. SIL has been negotiating with

Bangladesh to supply larger quantities of composite

cylinders in the upcoming year. The company has

received approval from TUV, PESO and KGS for its

cylinders. It has started trial lots with South Korea for its

20kg cylinder. Management expects good volume

demand from South Korea, given it is a coastal country

and rusting of steel cylinders is an issue.

SIL has met BIS standards, and BIS 16646 has been

published for type IV composite cylinders. This will allow

the company to market its cylinders to oil marketing

companies (OMC) in India. Apart from this, SIL has started

supplying cylinders, albeit in smaller quantities, to private

gas companies in Goa, Belgaum and Bengalaru. It

acquired a 10% business interest in HPC Research, a

startup company focused on R&D in composite cylinders

in the Czech Republic, to strengthen its R&D footprint in

pressure vessels in FY18.

We believe management has taken steps to raise its

presence in the composite cylinders segment. Entire

composite cylinder segment comes under value-added

product.

SIL profitability is susceptible to volatility in prices of key

raw materials, such as polyvinyl chloride (PVC),

polyethylene (PE), and polypropylene (PP). Prices of these

raw materials are linked to crude oil prices. SIL has strived

to reduce the linkage of its performance to crude oil prices

by increasing the proportion of high-margin specialty

products in its portfolio. Thus, with rising contribution of

value-added products in the plastics pipe systems and

composite cylinders segment, we expect margins to

improve by 100bps to 16% over 15% in 1HFY19.

Healthy capex plans over FY18-21

Consistent gross block addition

Exhibit 30: Consistent addition of gross block

Source: Company, Elara Securities Estimate

Exhibit 31: Sales growth outperforms gross block

addition

Source: Company, Elara Securities Estimate

SIL has consistently invested in building capacity since its

inception. Over the past 10 years, it posted a gross block

CAGR of 12% over FY08-18, from INR 8,279mn in FY08 to

INR 25,883mn in FY18. Overall top-line growth has

outpaced capex and posted a CAGR of 14% over the past

10 years.

3,4

04

3,6

57

3,9

41

4,5

07

3,3

37

4,6

58

2,000

2,500

3,000

3,500

4,000

4,500

5,000

FY12 FY13 FY14 FY15 FY16 FY17

(IN

R m

n)

0

10,000

20,000

30,000

40,000

FY08 FY13 FY18 FY19E FY20E FY21E

(IN

R m

n)

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

FY08 FY13 FY18 FY19E FY20E FY21E

(IN

R m

n)

Page 14: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

14 Elara Securities (India) Private Limited

Exhibit 32: Healthy fixed asset turnover

Source: Company, Elara Securities Estimate

As on FY18, the company’s manufacturing base across

India includes 25 plants in 11 states with total capacity of

568,000 tonnes with plastics piping capacity at 402,000

tonnes, packaging capacity of 65,000 tonnes, industrial

capacity at 69,000 tonnes, consumer furniture capacity at

29,000 and composite cylinders at 3,000 tonnes.

Total manufacturing units are expected to reach 28 by

end FY21 with a new plant in Telangana, according to

management. The company’s plastic pipes, protective

packaging & roto moulding products and furniture &

materials handling are expected to be produced from this

new plant.

We expect capacity to increase from 568,000 tonnes in

FY18 to 700,000 tonnes in FY21 with total capex of INR

11,000mn over FY19E-21E.

Govt initiatives to drive plastics piping systems sales

Plastics piping systems is core business segment of SIL,

contributing 55% and 50% to annual sales turnover and

EBITDA as on FY18. The company posted a sales CAGR of

9% over FY13-18, led by its plastics piping segment, which

posted a CAGR of 10% over the same period.

SIL manufactures plastic pipes using PVC, uPVC, CPVC,

and HDPE polymers. However, PVC and uPVC pipes

contribute to most of the company’s plastics piping

revenue. Demand for PVC pipes in India has grown at a

steady pace with total market size at USD 3.2bn by end-

FY16 as per Allied Market Research report. The PVC piping

market is expected to post a CAGR of 10.2% over FY16-23

and reach USD 6.6bn by end-FY23.

Polyvinyl chloride (PVC) is the third-largest selling

commodity in India. Its attributes of being chemically

resistant, durable, low cost, recyclable and easy-to-install

& use makes it a preferred material for application in

drainage, sewage, plumbing, agriculture, irrigation and

water supply in residential as well as industrial sectors.

In India, the need for proper infrastructure and installation

& transportation of water for end-users has become a

major driver for PVC pipes and fittings industry’s

expansion. In the past few years, the government has

been focused on rural water management and has

initiated several projects and investments in the irrigation

sector. The Central government has increased its

investment in the irrigation sector from INR 2,000bn

during FY07-11 to INR 3,300bn during FY11-16 in an

effort to bridge the gap in irrigation infrastructure to raise

agricultural output.

Under the PMAY scheme, India has set a target of 10mn

houses to be constructed in urban areas across the

country over CY15-22. As per Housing and Urban Affairs

(HUA) Ministry data, ~5.5mn houses were sanctioned in

the past three years of which 15% have already been

constructed. We expect the PMAY scheme to be positive

for companies such as Supreme, Astral Pipes (ASTRA IN,

CMP: INR 1155, Not Rated), Prince Pipes (Not Listed)

Ashirvad Pipes (Not Listed), Finolex Industries (FNXP IN,

CMP: INR 553, Not Rated) and Jain Irrigation (JI IN, CMP:

INR 69, Not Rated). Supreme Industries, being the market

leader in this segment, is expected to benefit the most.

Exhibit 33: Government initiatives to help the plastic

pipe industry

Source: Company, Elara Securities Research

Exhibit 34: Plastics piping systems: volume CAGR of

9% over FY18-21E

Source: Company, Elara Securities Estimate

2.4

3.0

3.5

3.2

3.8

3.2

3.63.8

2.4

3.4 3.5 3.5 3.6

4.0

2.0

2.5

3.0

3.5

4.0

4.5F

Y0

8

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

FY

19

E

FY

20

E

FY

21

E

(%)

150,000

200,000

250,000

300,000

350,000

FY16 FY17 FY18 FY19E FY20E FY21E

(to

nn

e)

PMAY Swachh Bharat Agriculture

Conversion from DI to PVC

Smart City Mission

Page 15: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

Co

nta

ine

rs &

Pa

ck

ag

ing

15 Elara Securities (India) Private Limited

Exhibit 35: Plastic piping systems sales CAGR of 12%

over FY18-21E

Source: Company, Elara Securities Estimate

The Swachh Bharat Abhiyaan is another flagship program

of the government, under which the Centre intends to

construct individual household, cluster and community

toilets. It aims to reach 100% sanitation coverage by end-

FY19.

Exhibit 36: Current status of Swachh Bharat Mission

Source: Ministry of Drinking Water and Sanitation, 2018

The government’s Smart City Mission is another initiative

that is expected to drive the plastics piping segment.

Under this initiative, we expect the existing ductile iron

pipes to be replaced by PVC and CPVC pipes. The city’s

sewage system is going to be another channel driving

double wall corrugated (DWC) piping demand.

With these government initiatives and SIL’s strong pan-

India manufacturing base, we expect a plastics piping

systems volume CAGR of 9% and a plastics piping systems

sales CAGR of 12% over FY18-21E.

Industrial products to provide needed impetus

We believe industrials product segment will bolster

growth over the next few years. SIL’s new plant in Ghilot

in Rajasthan to manufacture industrial components has

commenced commercial production during

September’18.

SIL’s industrials product segment is divided into two sub-

segments: industrial components and materials handling

products.

Exhibit 37: Industrial products volume CAGR of 15%

over FY18-21E

Source: Company, Elara Securities Estimate

Exhibit 38: Industrial products sales CAGR of 28% in

FY18-21E

Source: Company, Elara Securities Estimate

Exhibit 39: Industrial components: applications

Source: Company, Elara Securities Research

Industrial components: key growth lever

Within industrial components, SIL caters to automotive,

consumer durables and other home appliances segments.

Some auto clients include Tata Motors, Honda India,

Maruti Suzuki and Piaggio. The company has been

supplying cockpit assembly for LCV and MCV models,

Ultra for Tata Motors. It also has been working on several

models for Maruti and Honda (including SUV model, WR-

V). SIL started supplying components for the new two–

wheeler, SR 150 and existing Vespa by Piaggio. SIL

currently supplies plastic components to auto OEM.

However, it intends to meet entire supply value chain,

right from designing to development for auto

manufacturers. SIL has entered into JV with Kumi Kasei, a

Japan entity, to set up a new entity, Kumi Supreme India

(JVC). Kumi is a major supplier to Honda for interior parts

10,000

15,000

20,000

25,000

30,000

35,000

40,000

FY16 FY17 FY18 FY19E FY20E FY21E

(IN

R m

n)

150,000

200,000

250,000

300,000

350,000

FY16 FY17 FY18 FY19E FY20E FY21E

(to

nn

e)

10,000

15,000

20,000

25,000

30,000

35,000

40,000

FY16 FY17 FY18 FY19E FY20E FY21E

(IN

R m

n)

90mn toilets built 58.77% increase in

HH with toilets 20mn toilets built

in 2018-19

559 ODF

districts

0.5mn ODF

villages

Automotive Air

Conditioners

Washing machines Home appliances

Page 16: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

16 Elara Securities (India) Private Limited

of automotive applications globally. With this new JV, we

believe SIL’s technological competence will improve.

Exhibit 40: Industrial components volume CAGR of :

14% over FY16-18

Source: Company, Elara Securities Research

Within SIL’s consumer appliances segment, Bosch,

Samsung and Whirlpool are key clients. The company has

taken steps to rationalize and reorient machine capacity

at various locations to align with changes in product mix.

It also has added new machines equipped with latest

energy-efficient technology. With the required changes,

we believe SIL’s product mix in the industrials segment has

improved significantly, leading to volume growth of 16%

and realization growth of 18% during 1HFY19. Sales from

this segment grew at 38% in 1HFY19.

Material handling products, an annuity business

Apart from the automotive and consumer durables

business, SIL remains a major materials handling

equipment supplier, providing crates to automobiles,

FMCG, white goods, engineering and retail sectors. The

company also provides customized fabrication based on

consumer needs. SIL remains a key supplier of bottle crates

to two major software drink suppliers.

Exhibit 41: Materials handling products volume CAGR

of 13% over FY16-18

Source: Company, Elara Securities Research

We believe with growth coming from multiple sectors, SIL

has sufficiently reduced its risk of overdependence on a

particular sector.

Strong cashflow generating model

SIL remains one of the most efficient plastics

manufacturers in terms of working capital management.

Except for Finolex Industries, SIL’s working capital as a

percentage of sales remains the lowest.

Exhibit 42: SIL WC as a % of sales is the lowest among

peers

Note; FY18, Source: Company, Elara Securities Research

Exhibit 43: Steady working capital cycle at 40 days

Source: Company, Elara Securities Estimate

Efficient working capital management has allowed SIL to

consistently generate healthy cashflow from operations.

Hence, despite operating in a capital-intensive business,

the company has been able to maintain a healthy

dividend payout ratio of ~40% of PAT over the past

several years.

Exhibit 44: Superior dividend payout

Source: Company, Elara Securities Estimate

0

13

31

(12)

11

18

(20)

(10)

0

10

20

30

40

FY16 FY17 FY18

(%)

Volume growth Value growth

13

7

18

7 7

30

0

10

20

30

40

FY16 FY17 FY18

(%)

Volume growth Value growth

8.912.8

8.0

38.0

29.8

23.5

0

10

20

30

40

Su

pre

me

Ind

ust

rie

s

Ast

ral P

oly

Fin

ole

xIn

du

stri

es

Jain

Irri

ga

tio

n

Tim

eT

ech

no

pla

st

Nilk

am

al

(%)

0

20

40

60

80

FY16 FY17 FY18 FY19E FY20E FY21E

(Da

ys)

Inventory days Sundry debtors days

Sundry creditor days WC days

43.3

44.5

42.6

41.7 41.7

40.2

38

39

40

41

42

43

44

45

0

500

1,000

1,500

2,000

2,500

3,000

FY

16

FY

17

FY

18

FY

19

E

FY

20

E

FY

21

E

(%)

(IN

R m

n)

Dividend Dividend payout

Page 17: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

Co

nta

ine

rs &

Pa

ck

ag

ing

17 Elara Securities (India) Private Limited

Exhibit 45: Healthy cashflow from operations

Source: Company, Elara Securities Estimate

1,870

5,8975,262

6,849 7,158

8,607

0

2,000

4,000

6,000

8,000

10,000

FY

16

FY

17

FY

18

FY

19

E

FY

20

E

FY

21

E

(IN

R m

n)

Page 18: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

18 Elara Securities (India) Private Limited

Sustained growth to continue

SIL had posted a top-line CAGR 14% over FY08-18. This

healthy growth was led by ~9% volume CAGR while the

rest came from increase in price realization. In the medium

term (FY13-18), the company posted a sales CAGR of 8%,

driven by 6% volume growth.

In its three-year business plan, management expects

manufacturing plants to go up from 25 to 28, with a new

plant coming in Telangana by FY20. We expect capex of

INR 3,000-4,000mn pa with total capex of INR 11,000mn

over FY19E-21E. With both demand drivers and capacity

in place, we expect a volume CAGR of 9% over FY18-21E.

Exhibit 46: Volume CAGR of 9% over FY18-21E

Source: Company, Elara Securities Estimate

Exhibit 47: Capex of INR 11,000mn over FY19E-21E

Source: Company, Elara Securities Estimate

Exhibit 48: Sales CAGR of 14% over FY18-21E

Source: Company, Elara Securities Estimate

Exhibit 49: EBITDA CAGR of 15% over FY18-21E

Source: Company, Elara Securities Estimates

Exhibit 50: PAT CAGR of 15% over FY18-21E

Source: Company, Elara Securities Estimate

371,176

401,824

439,373

482,666

300,000

350,000

400,000

450,000

500,000

FY18 FY19E FY20E FY21E

(IN

R m

n)

2,855

3,950 4,009

3,045

2,000

2,500

3,000

3,500

4,000

4,500

FY18 FY19E FY20E FY21E

(IN

R m

n)

49,663

56,696

64,568

74,207

40,000

50,000

60,000

70,000

80,000

FY18 FY19E FY20E FY21E

(IN

R m

n)

7,871

8,674

10,073

11,873

6,000

8,000

10,000

12,000

14,000

FY18 FY19E FY20E FY21E

(IN

R m

n)

4,311

4,879

5,333

6,480

3,000

4,000

5,000

6,000

7,000

FY18 FY19E FY20E FY21E

(IN

R m

n)

Multiple cogs at work

Volume CAGR of 9%, sales CAGR of 14%, EBITDA CAGR of 15% & PAT CAGR of 15% in FY18-21E

Plastics piping systems and industrial products segments to do major lifting

Initiate with a Buy and a TP of INR 1,537, implying 29% upside

Page 19: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

Co

nta

ine

rs &

Pa

ck

ag

ing

19 Elara Securities (India) Private Limited

Efficient capital allocation drives the compounding

SIL has been one of the most efficient firms in terms of

capital allocation. This is evident from its ex-cash ROCE.

Long-term (FY08-18) ROCE stands at 24% while in the

medium term (FY13-18), it was 25%. We expect this trend

to continue and estimate ex-cash RoCE to reach 26.6% in

FY21.

Exhibit 51: Efficient capital allocation model: ex-cash

ROCE

Source: Company, Elara Securities Research

Exhibit 52: Ex-cash ROCE to improve further by FY21

Source: Company, Elara Securities Estimate

Superior capital allocaiton has allowed the company to

expand its gross block at a CAGR of 12% over FY08-18 and

maintain a dividend distribution policy with a payout of

~40% of PAT. We expect a similar trend to continue over

FY18-21E.

Exhibit 53: Consistent capex over the past 10 years

Source: Company, Elara Securities Research

Exhibit 54: Healthy capex to continue

Source: Company, Elara Securities Estimate

SIL has consistently performed capex for the past 10 years.

The company spent ~INR 20,000mn on building capacity

over FY08-18. We estimate an additonal capex of INR

11,000mn over FY19E-21E.

Exhibit 55: Consistent dividend payout policy

Source: Company, Elara Securities Research

Exhibit 56: Healthy dividend payout to continue

Source: Company, Elara Securities Estimate

Over FY08-18, SIL distributed INR 9,652mn in dividend.

We expect this trend to continue and estimate cumulative

dividend distribution of INR 8,694mn over FY18-21E.

Despite health capex rate and dividend distribution policy,

the company’s high ROCE business model has led to a

book value CAGR of 21% over the past 10 years. We

expect this run to continue, and expect a book value

CAGR of19% over FY18-21E.

16

2526

23

28 28

25

26

21

2524

15

20

25

30

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

(%)

24

23

24

27

22

23

24

25

26

27

FY18 FY19E FY20E FY21E

(IN

R m

n)

1,429

517750

2,511

779

3,694

1,4681,665

2,244

2,121

2,855

0

1,000

2,000

3,000

4,000

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

(IN

R m

n)

2,855

3,950 4,009

3,045

2,500

3,000

3,500

4,000

4,500

FY18 FY19E FY20E FY21E

(IN

R m

n)

221 305457

546 572699

1,016

1,143

953

1,905

1,835

0

500

1,000

1,500

2,000

2,500F

Y0

8

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

(IN

R m

n)

1,835

2,032

2,223

2,604

1,600

1,800

2,000

2,200

2,400

2,600

2,800

FY18 FY19E FY20E FY21E

(IN

R m

n)

Page 20: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

20 Elara Securities (India) Private Limited

Exhibit 57: Book value CAGR of 21% over FY08-18

Source: Company, Elara Securities Research

Exhibit 58: Healthy net worth expansion

Source: Company, Elara Securities Estimate

Plastics piping, industrials to lead

We believe various government initiatives will lead to

healthy volume growth of the plastics piping system

segment. The plastics piping systems segment, a major

contributor to total sales, would drive a top-line CAGR of

14% over FY18-21E.

Exhibit 59: Industrial products and plastics piping

systems to grow faster than others

Source: Company, Elara Securities Estimate

Exhibit 60: Rising contribution from industrials

Source: Company, Elara Securities Estimate

Exhibit 61: Margin to remain stable over FY18-21E

Source: Company, Elara Securities Estimate

Balance sheet to remain lean

SIL has maintained a lean balance sheet since FY12. The

company’s debt-to-equity ratio has declined steadily, from

0.5x in FY12 to 0.1x in FY18. We estimate it to become a

net cash company despite capex of INR 11,000mn over

the next three years.

Exhibit 62: Continue with lean balance sheet

Source: Company, Elara Securities Estimate

2,705

3,041

4,141

5,477

6,967

8,790

10,391

12,115

13,157 16,957

18,949

0

5,000

10,000

15,000

20,000

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

(IN

R m

n)

18,949

22,689

26,506

30,847

15,000

20,000

25,000

30,000

35,000

FY18 FY19E FY20E FY21E

(IN

R m

n)

0

10

20

30

40

FY18 FY19E FY20E FY21E

(%)

Plastics Piping Systems Packaging Products

Industrial Products Consumer products

16 19 20 22

0

20

40

60

80

100

FY18 FY19E FY20E FY21E

(%)

Plastics Piping Systems Packaging Products

Industrial Products Consumer products

15.8

15.3

15.6

16.0

15.2

15.4

15.6

15.8

16.0

16.2

FY18 FY19E FY20E FY21E

(%)

0.120.08

0.050.03

(0.3)

(0.2)

(0.1)

0.0

0.1

0.2

(6,000)

(4,000)

(2,000)

0

2,000

4,000

FY18 FY19E FY20E FY21E

(%)

(IN

R m

n)

Net Debt D/E

Page 21: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

Co

nta

ine

rs &

Pa

ck

ag

ing

21 Elara Securities (India) Private Limited

Initiate with Buy and a TP of INR 1,537

We initiate coverage of Supreme Industries with a Buy

rating and a 12-month target price of INR 1,537, implying

29% upside from the current levels. Our TP is based on 30x

FY21E EPS of INR 51. Our one-year forward target

multiple of 30x is at par with the five-year P/E median of

30x and at a 12% discount to its three-year P/E median of

34x. The stock currently trades at 31x FY19E P/E, 28x

FY20E P/E and 23x FY21E P/E, presenting a good entry

opportunity.

Exhibit 63: Valuation overview

Year FY21E

EPS (INR) 51

One-year forward P/E median (three-year average) (x) 34

One-year forward P/E median (five-year average) (x) 30

Current market cap (INR mn) 151,334

No of shares (mn) 127

Target multiple (x) 30

TP (INR) 1,537

CMP (INR) 1,191

Upside (%) 29

Note: pricing as on 28 December 2018; Source: Elara Securities Estimate

Margin expansion of 100bp by FY21E over 1HFY19

Our growth estimates are driven by: 1) steady

contribution of VAP of 35%+, and 2) an improving

product mix to lift realization per unit by CAGR 5% over

FY18-21E.

Sales CAGR of 14%, EBITDA 15% and PAT of 15%

With growth and margin levers in place, we expect a

revenue CAGR of 14%, an EBITDA CAGR of 15% and a

PAT CAGR of 15% over FY18-21E.

Exhibit 64: Key assumptions

(%) Volume

CAGR (%) Sales

CAGR (%) Margin

improvement (bp)

FY18-21E 9 14 100

Note: Margin improvement is over 1HFY19 to FY21E

Source: Elara Securities Estimate

Investment risks

Slowdown in real estate or construction activities

Our sales CAGR assumption of 14% over FY18-21E is

based on plastics piping systems segment volume CAGR

of 9% and value CAGR of 12% over FY18-21E. Sales

growth of the plastics piping systems segment can get

dented if there is a slowdown in PMAY activities, non-

PMAY sales or a poor Monsoon.

Rising crude prices can dent margin

Sales revenue from the piping segment was at ~55% of

total sales as on FY18. Majority of pipe segment sales

comes from PVC and uPVC pipes in which the key raw

material is PVC resin. PVC resin prices fluctuate with

change in crude prices. Our channel checks show PVC

and uPVC pipe prices are revised twice a month. If there

were a sharp rise in crude prices, it would lift PVC resin

prices, denting EBITDA margin.

Page 22: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

22 Elara Securities (India) Private Limited

Appendix

Exhibit 65: Manufacturing base

Location State Industrial products Consumer products Packaging products Plastic piping Composites

Derabassi Punjab

Durgapur West Bengal

Gadegaon Maharashtra

Ghiloth Rajasthan

Guwahati Assam

Halol - Unit I Gujarat

Halol - Unit II Gujarat

Halol - Unit III Gujarat

Halol – Unit IV Gujarat

Hosur - Unit I Tamil Nadu

Hosur - Unit II Tamil Nadu

Jalgaon – Unit I Maharashtra

Jalgaon – Unit II Maharashtra

Kanhe Maharashtra

Kanpur Maharashtra

Kharagpur West Bengal

Khopoli Maharashtra

Malanpur – Unit I Madhya Pradesh

Malanpur – Unit II Madhya Pradesh

Malanpur – Unit III Madhya Pradesh

Noida Uttar Pradesh

Puducherry Union Territory

Silvassa Union Territory

Sriperumbudur Tamil Nadu

Urse Maharashtra

Jadcherla* Telangana

Note: *under construction; Source: Company, Elara Securities Research

Page 23: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

Co

nta

ine

rs &

Pa

ck

ag

ing

23 Elara Securities (India) Private Limited

Company Description

Supreme Industries is India's leading plastic processing company with seven business divisions. The company has

forayed into different types of plastic processing, such as injection moulding, rotational moulding (ROTO), extrusion,

compression moulding and blow moulding. It offers a wide range of products with multiple applications in moulded

furniture, cross laminated films (XF) & products, performance films, storage & material handling, industrial, protective

packaging & composite plastic products, plastics piping systems & petrochemicals.

The company also offers the most comprehensive range of plastic products in India. Its 25 plants are powered by

technology from world leaders, and complement extensive facilities for R&D and new product development. Supreme

is credited with pioneering several products in India, such as cross-laminated, multilayer films and Soil, Waste and Rain

(SWR) piping systems.

Exhibit 66: Key management personnel as on FY18

Employees Designation

BL Taparia Chairman

MP Taparia Managing Director

PC Somani Chief Financial Officer

Source: Company, Elara Securities Research

Page 24: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Supreme Industries

24 Elara Securities (India) Private Limited

Coverage History

Date Rating Target Price Closing Price

1

28-Dec-2018 Buy INR 1,537 INR 1,191

Guide to Research Rating

BUY Absolute Return >+20%

ACCUMULATE Absolute Return +5% to +20%

REDUCE Absolute Return -5% to +5%

SELL Absolute Return < -5%

1

800

900

1,000

1,100

1,200

1,300

1,400

1,500

De

c-1

7

Jan

-18

Fe

b-1

8

Ma

r-1

8

Ap

r-1

8

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-

18

No

v-1

8

De

c-1

8

Not Covered Covered

Page 25: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Elara Securities (India) Private Limited

Glo

ba

l M

ark

ets

Re

sea

rch

25 25

Disclosures & Confidentiality for non U.S. Investors

The Note is based on our estimates and is being provided to you (herein referred to as the “Recipient”) only for information purposes. The sole purpose of this Note

is to provide preliminary information on the business activities of the company and the projected financial statements in order to assist the recipient in understanding

/ evaluating the Proposal. Nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of companies referred

to in this document. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment

in the securities of companies referred to in this document (including the merits and risks involved) and should consult its own advisors to determine the merits and

risks of such an investment. Nevertheless, Elara Securities (India) Private Limited or any of its affiliates is committed to provide independent and transparent

recommendation to its client and would be happy to provide any information in response to specific client queries. Elara Securities (India) Private Limited or any of

its affiliates have not independently verified all the information given in this Note and expressly disclaim all liability for any errors and/or omissions, representations

or warranties, expressed or implied as contained in this Note. The user assumes the entire risk of any use made of this information. Elara Securities (India) Private

Limited or any of its affiliates, their directors and the employees may from time to time, effect or have effected an own account transaction in or deal as principal or

agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for or solicit investment banking

or other business from any company referred to in this Note. Each of these entities functions as a separate, distinct and independent of each other. This Note is

strictly confidential and is being furnished to you solely for your information. This Note should not be reproduced or redistributed or passed on directly or indirectly

in any form to any other person or published, copied, in whole or in part, for any purpose. This Note is not directed or intended for distribution to, or use by, any

person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use

would be contrary to law, regulation or which would subject Elara Securities (India) Private Limited or any of its affiliates to any registration or licensing requirements

within such jurisdiction. The distribution of this document in certain jurisdictions may be restricted by law, and persons in whose possession this document comes,

should inform themselves about and observe, any such restrictions. Upon request, the Recipient will promptly return all material received from the company and/or

the Advisors without retaining any copies thereof. The Information given in this document is as of the date of this report and there can be no assurance that future

results or events will be consistent with this information. This Information is subject to change without any prior notice. Elara Securities (India) Private Limited or any

of its affiliates reserves the right to make modifications and alterations to this statement as may be required from time to time. However, Elara Securities (India) Private

Limited is under no obligation to update or keep the information current. Neither Elara Securities (India) Private Limited nor any of its affiliates, group companies,

directors, employees, agents or representatives shall be liable for any damages whether direct, indirect, special or consequential including lost revenue or lost profits

that may arise from or in connection with the use of the information. This Note should not be deemed an indication of the state of affairs of the company nor shall

it constitute an indication that there has been no change in the business or state of affairs of the company since the date of publication of this Note. The disclosures

of interest statements incorporated in this document are provided solely to enhance the transparency and should not be treated as endorsement of the views

expressed in the report. Elara Securities (India) Private Limited generally prohibits its analysts, persons reporting to analysts and their family members from

maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The analyst for this report certifies that all of the views

expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her

compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.

Any clarifications / queries on the proposal as well as any future communication regarding the proposal should be addressed to Elara Securities (India) Private

Limited.

Elara Securities (India) Private Limited was incorporated in July 2007 as a subsidiary of Elara Capital (India) Private Limited.

Elara Securities (India) Private Limited is a SEBI registered Stock Broker in the Capital Market and Futures & Options Segments of National Stock Exchange of India

Limited (NSE) and in the Capital Market Segment of BSE Limited (BSE).

Elara Securities (India) Private Limited’s business, amongst other things, is to undertake all associated activities relating to its broking business.

The activities of Elara Securities (India) Private Limited were neither suspended nor has it defaulted with any stock exchange authority with whom it is registered in

last five years. However, during the routine course of inspection and based on observations, the exchanges have issued advise letters or levied minor penalties on

Elara Securities (India) Private Limited for minor operational deviations in certain cases. Elara Securities (India) Private Limited has not been debarred from doing

business by any Stock Exchange / SEBI or any other authorities; nor has the certificate of registration been cancelled by SEBI at any point of time.

Elara Securities (India) Private Limited offers research services primarily to institutional investors and their employees, directors, fund managers, advisors who are

registered or proposed to be registered.

Details of Associates of Elara Securities (India) Private Limited are available on group company website www.elaracapital.com

Elara Securities (India) Private Limited is maintaining arms-length relationship with its associate entities.

Research Analyst or his/her relative(s) may have financial interest in the subject company. Elara Securities (India) Private Limited does not have any financial interest

in the subject company, whereas its associate entities may have financial interest. Research Analyst or his/her relative does not have actual/beneficial ownership of

1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research Report. Elara Securities (India)

Private Limited does not have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date

of publication of Research Report. Associate entities of Elara Securities (India) Private Limited may have actual/beneficial ownership of 1% or more securities of the

subject company at the end of the month immediately preceding the date of publication of Research Report. Research Analyst or his/her relative or Elara Securities

(India) Private Limited or its associate entities does not have any other material conflict of interest at the time of publication of the Research Report.

Research Analyst or his/her relative(s) has not served as an officer, director or employee of the subject company.

Research analyst or Elara Securities (India) Private Limited have not received any compensation from the subject company in the past twelve months. Associate

entities of Elara Securities (India) Private Limited may have received compensation from the subject company in the past twelve months. Research analyst or Elara

Securities (India) Private Limited or its associate entities have not managed or co-managed public offering of securities for the subject company in the past twelve

months. Research analyst or Elara Securities (India) Private Limited or its associates have not received any compensation for investment banking or merchant banking

or brokerage services from the subject company in the past twelve months. Research analyst or Elara Securities (India) Private Limited or its associate entities may

have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company or

third party in connection with the Research Report in the past twelve months.

Disclaimer for non U.S. Investors

The information contained in this note is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we

endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will

continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the

particular situation.

Page 26: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Elara Securities (India) Private Limited

26

Disclosures for U.S. Investors

The research analyst did not receive compensation from Supreme Industries Limited.

Elara Capital Inc.’s affiliate did not manage an offering for Supreme Industries Limited.

Elara Capital Inc.’s affiliate did not receive compensation from Supreme Industries Limited in the last 12 months.

Elara Capital Inc.’s affiliate does not expect to receive compensation from Supreme Industries Limited in the next 3 months.

Disclaimer for U.S. Investors

This material is based upon information that we consider to be reliable, but Elara Capital Inc. does not warrant its completeness, accuracy or adequacy and it

should not be relied upon as such.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or

strategies mentioned herein may not be suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice,

and are only correct as of the stated date of their issue. Prices, values or income from any securities or investments mentioned in this report may fall against the

interests of the investor and the investor may get back less than the amount invested. Where an investment is described as being likely to yield income, please

note that the amount of income that the investor will receive from such an investment may fluctuate. Where an investment or security is denominated in a

different currency to the investor’s currency of reference, changes in rates of exchange may have an adverse effect on the va lue, price or income of or from that

investment to the investor. The information contained in this report does not constitute advice on the tax consequences of making any particular investment

decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation of

particular securities, financial instruments or strategies to you. Before acting on any recommendation in this material, you should consider whether it is suitable

for your particular circumstances and, if necessary, seek professional advice.

Certain statements in this report, including any financial projections, may constitute “forward-looking statements.” These “forward-looking statements” are not

guarantees of future performance and are based on numerous current assumptions that are subject to significant uncertainties and contingencies. Actual future

performance could differ materially from these “forward-looking statements” and financial information.

Page 27: India | Containers & Packaging Initiating Coverage Supreme ......Elara Securities (India) Private Limited Juggernaut Leader in plastics: well-diversified portfolio and pan-India reach

Elara Securities (India) Private Limited

Glo

ba

l M

ark

ets

Re

sea

rch

27 27

India Elara Securities (India) Pvt. Ltd. Indiabulls Finance Centre, Tower 3, 21st Floor, Senapati Bapat Marg, Elphinstone Road (West) Mumbai – 400 013, India Tel : +91 22 6164 8500

Europe Elara Capital Plc. 6th Floor, The Grove, 248A Marylebone Road, London, NW1 6JZ United Kingdom Tel : +44 20 7486 9733

USA Elara Securities Inc. 950 Third Avenue, Suite 1903, New York, NY 10022, USA Tel: +1 212 430 5870 Fax: +1 212 208 2501

Asia / Pacific Elara Capital (Asia) Pte.Ltd. 30 Raffles Place #20-03A, Chevron House Singapore 048622 Tel : +65 6692 0174

Harendra Kumar Managing Director [email protected] +91 22 6164 8571

Sales

Hitesh Danak India [email protected] +91 22 6164 8543

Karan Rathod India [email protected] +91 22 6164 8570

Prashin Lalvani India [email protected] +91 22 6164 8544

Shraddha Shrikhande India [email protected] +91 22 6164 8567

Sushil Bhojwani India [email protected] +91 22 6164 8512

Sudhanshu Rajpal India [email protected] +91 22 6164 8508

Gangadhara Kini US, Australia [email protected] +91 22 6164 8558

Quantitative, Alternatives, Sales Trading & Dealing

Sunil Jain Quantitative & Alternates [email protected] +91 22 6164 8531

Manan Joshi India [email protected] +91 22 6164 8555

Manoj Murarka India [email protected] +91 22 6164 8551

Nupur Barve India [email protected] +91 22 6164 8532

Ravi Sundar Muthukrishnan Ph.D Head - Institutional Equity Research [email protected] +91 22 6164 8572

Research

Akhil Parekh Analyst Midcap [email protected] +91 22 6164 8519

Ankita Shah Analyst Infrastructure, Ports & Logistics [email protected] +91 22 6164 8516

Biju Samuel Analyst Quantitative & Alternate Strategy [email protected] +91 22 6164 8505

Gagan Dixit Analyst Oil & Gas, Aviation [email protected] +91 22 6164 8504

Garima Kapoor Economist [email protected] +91 22 6164 8527

Harshit Kapadia Analyst Capital Goods [email protected] +91 22 6164 8542

Karan Taurani Analyst Media [email protected] +91 22 6164 8513

Jay Kale, CFA Analyst Auto & Auto Ancillaries [email protected] +91 22 6164 8507

Param Desai Analyst Pharmaceuticals, Healthcare, Real Estate [email protected] +91 22 6164 8528

Pankaj Chhaochharia Analyst Strategy, Consumer Electronics [email protected] +91 22 6164 8503

Pradeep Kumar Kesavan, CFA Analyst Strategy [email protected] +91 22 6164 8541

Pratik Tholiya Analyst Agrochemicals, Travel & Hospitality [email protected] +91 22 6164 8518

Rakesh Kumar Analyst Banking & Financials [email protected] +91 22 6164 8559

Ravi Menon Analyst IT Services, Internet, Telecom [email protected] +91 22 6164 8502

Ravi Sodah Analyst Cement, Building Materials [email protected] +91 22 6164 8517

Ritika Dua Analyst Diversified Financials [email protected] +91 22 6164 8526

Sagarika Mukherjee Analyst FMCG, Dairy [email protected] +91 22 6164 8594

Aarti Rao Associate Pharmaceuticals, Healthcare, Real Estate [email protected] +91 22 6164 8535

Ashish Agrawal Associate IT Services, Internet, Telecom [email protected] +91 22 6164 8573

Chintan Shah Associate Banking & Financials [email protected] +91 22 6164 8521

Harsh Jhanwar Associate Cement, Building Materials [email protected] +91 22 6164 8546

Praneet Nikumbh Associate Diversified Financials [email protected] +91 22 6164 8506

Priyanka Trivedi Associate Agrochemicals, Travel & Hospitality [email protected] +91 22 6164 8588

Rachael Alva Associate Oil & Gas, Aviation [email protected] +91 22 6164 8525

Shubham Maheshwari Associate FMCG, Dairy [email protected] +91 22 6164 8562

Vijay Gyanchandani Associate Auto & Auto Ancillaries [email protected] +91 22 6164 8511

Vinayak Patil Database [email protected] +91 22 6164 8510

Priyanka Sheth Editor [email protected] +91 22 6164 8568

Gurunath Parab Production [email protected] +91 22 6164 8515

Jinesh Bhansali Production [email protected] +91 22 6164 8537

Access our reports on Bloomberg: Type ESEC <GO> Also available on Thomson & Reuters

Elara Securities (India) Private Limited

CIN: U74992MH2007PTC172297 SEBI RA Regn. No.: INH000000933

Member (BSE, NSE)

Regn Nos: CAPITAL MARKET SEBI REGN. NO.: BSE: INB 011289833, NSE: INB231289837 DERIVATIVES SEBI REGN. NO.: NSE: INF 231289837 Website: www.elaracapital.com Investor Grievance Email ID: [email protected]