The Supreme Industries Limited (SUPREMEIND) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Supreme Industries Q3 FY '26 Earnings Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aasim Bharde, from Dam Capital Advisors Limited. Thank you, and over to you, sir.

Thanks. Good evening, everyone. I would like to welcome you all on Supreme Industries Q3 FY '26 Results Call. We have the senior management of the company with us on the call, led by Mr. Taparia, the Managing Director, to whom I hand over the call now. Thank you, and over to you, sir.

Thank you. Good afternoon. Thank you, everyone, Mr. Aasim. I'm Mahavirprasad Taparia, Managing Director of the Supreme Industries Limited. I, along with my colleague, Shri P.C. Somani, CFO; and Shri R.J. Saboo, Vice President Corporate Affair and Company Secretary, welcome all the participants who are participating in the discussion of the unaudited stand-alone and consolidated financial results for quarter and 9-month period ended 31st December 2025. The stand-alone results and the consolidated results are already with you, I will be brief on company product operating performance and other highlights. The company sold [indiscernible] metric tonne of and achieved net product turnover of INR 7,582 crores during the 9 months of the current year against sale of [ 4,74,645 ] tonnes and net product turnover of INR 7,336 crores in the corresponding 9 month of previous year, achieving volume and product value growth of about 10% and 3%, respectively. The consolidated operating profit and profit after tax for the 9 months of the current year amounted to INR 980 crores and INR 520 crores, as compared to INR 1,103 crores and INR 667 crores, respectively, for the corresponding period of the previous year, resulting in a decrease of 11% and 22%, respectively. The business scenario of all the product segment of the company for the third quarter ended 31 December 2025, as compared to the corresponding quarter of previous year has been [ as under. ] Plastic Piping business grew by 16% in volume and 10% in value terms. Packaging Product segment business grew 2% in volume and [ grew ] by 2% in value term. Industrial Product segment business remained flat in volume and grew by 1% value term. Consumer Product segment business grew by 8% in volume and 5% in value term. The overall turnover of value-added product remain at INR 1,118 crores during the third quarter of the current year against INR 961 crores in the corresponding quarter of the previous year, achieving growth of around 16%. Business outlook. World economy growth is affected by geopolitical concerns in several regions. This has resulted in extreme volatility in commodity prices. Combination of these factors have resulted in lower growth in world economy in the year 2025. The company believes this downward trend has now reversed. Polymer prices have started upward trend. The polymer provision has gone through quite tough time, which has resulted into closure of several petrochemical plants and all running at quite low capacity. Combined outcome of these actions has put break in erosion of the prices of polymers. Starting from the calendar year 2026, the polymer price has started upward movement. The company is operating in various segments of the business. The company has grown 10% in overall volume and 13% in Plastic Piping business in first 9 months of the current year. The company expects to grow overall in volume between 12% to 14% and for Plastic Piping system, we expect to grow 15% to 17% during the year over previous year. Plastic Piping business growth is now coming back to normalcy as continuous downward price trend has been arrested, driven by good monsoon, favorable economic conditions and encompassing housing, agriculture, infrastructure in the last quarter of FY '26, we put good demand growth in the year. The company is well equipped to meet increased demand of this piping portfolio. Newly launched PP Silent Pipe System and technical collaboration with Poloplast of Austria has been well issue in the market. The company is expanding its range of [indiscernible] and bathware products. The company continues to invest in enlarged the product basket in all the division and to remain focused in increasing it's share of value added product. Capacity expansion at various locations for plastic piping business and protective packaging products taken in hand are nearing completion and shall be available for full fiscal year FY '27. As informed earlier, new greenfield plant capacity have taken up for execution in this financial year. [indiscernible] acquired through [indiscernible] acquisition are fully integrated and realigned and shall be available for the full potential from this month -- from February onward. Total install capacity of the plastic piping business shall lead to 1 million tonne per annum by FY '26. Project execution and site for profile for window is now nearing completion, production cash have commenced. The company expects to launch commercial production window in the market from February 2026. During the first 9 months of the current year, company has made CapEx outflow of INR 1,031 crores, including acquisition of Wavin business. The company expects total cash outflow during this year will be around INR 1,200 crores towards existing and new capital commitment, including acquisition of Wavin business entire capital funded from internal accruals. All other product divisions are faring well and [indiscernible] moderate growth during the year. The protective packaging product division is especially driving it's growth plan by increasing product range, expanding capacity and offering customized solutions. The company has fully executed Letter of Intent for supply of 200,000 numbers of 10 kilo composite LPG cylinder to Bharat Petroleum Corporation Limited. Company issued further Letter of Intent for supply of 200,000 numbers of composite cylinder to Bharat Petroleum Corporate Limited, which shall be executed in the current quarter. The company continues to work to expand export geography and participate national and international exhibition in the field of energy and gas. This is a brief and overall synergy for the quarter and half year ended -- quarter and half year under reference. Thank you for your patience now. Now I and my colleague, Shri P.C. Somani and Shri R.J. Saboo are available to reply to various queries by all of you. Thank you very much.

[Operator Instructions] The first question is from the line of Shravan Shah from Dolat Capital.

Sir, first, on the volume front. So this quarter, Wavin volume was how much?

[indiscernible] after all they are making same product we are making. So we cannot say how much volume you have Wavin but we got Wavin customer also more than 180 customers joined our company. And they made the same product what we were making, on some range [indiscernible] different. So you can see the part of overall volume of 16% growth in the quarter compared growth due to Wavin also.

Okay. Got it. And sir, now given that now we are maintaining the piping volume growth of 15% to 17%, that means the -- for the fourth quarter of '26, the ask rate is 20% to 27%. Are we confident that this will be done given, also, if you can throw light in terms of how the PVC prices have increased till now? And how do we see, given the China whatever that will be applicable from the 1st April. So before that, is there a possibility that further price of PVC can decline?

[indiscernible]. basically, this quarter onwards, the demand [indiscernible] that the demand [indiscernible]. This quarter, we include the month of March. So demand for agriculture segment come always big way after the harvesting of crops that happens end of February. [indiscernible] being harvested. So we are seeing [indiscernible] sector. While confusion, that the growth this quarter will be ridicule to justify our guidance of 15% to 17%. We are quite capable. In third quarter, we have grown by 16%. Now they started hardening. First thing I say this to going down, the previously world booking has gone down up to [ $580 ] and now currently $640. And the rupee also become [ weak. ] Earlier it was INR 89 and now close to INR 92 and local makers fixed the price based on import [indiscernible]. So [indiscernible] price has gone up and with the rupee depreciating further and China putting some restrictions [indiscernible] we anticipate that price may go further up [indiscernible].

Got it. Sir, now on the margin front, so in the 9 months and even this quarter also, our overall EBITDA margin is 12.1%, even if we exclude the labor code extra INR 15 crore or also then also 12.3%, but we were looking at previously 14.5% to 15%. So now how one can look at the margin for fourth quarter and even, let's say, going forward for FY '27, '28 and how one can look at the margin?

'27, '28, we will talk in April. For the current year, now we have revised our guideline. We now believe that our margin will be 13.5% to 14%.

But sir, that also means that in the fourth quarter, we are looking at minimum 15%, 16% plus kind of a margin.

[indiscernible]

Okay. And lastly, sir, finance costs, other income and profit from associate, all these 3 things, particularly other income and profits from associate has came down and finance costs has gone up. So how one can look at on the quarterly run rate basis?

You see finance cost increase is temporary for this funding, the CapEx plan totally for the current year. So some short-term borrowings have been taken, not compromising on the liquidity of the balances, finance cost is a bit higher in this quarter, it was there in last quarter. Going forward, we will, again, be having a good surplus in hand. Our whole CapEx plan is only [indiscernible] INR 1,031 crores outflow has been made. How much outflow has been planned now for the current year? And other income is -- since other income mainly consists of the surplus being generated from the liquid balances since we had a healthy opening balance of [indiscernible] surplus by putting [indiscernible] schemes which has gone down. So that is a temporary pace. And ultimately, we want to put our money from business [indiscernible], the investment is not the core activity.

True. So the in Q2, the other income was INR 15.5 crores, and now it came to close to INR 3.8 crores. So from Q4, again, can we see a INR 8 crores, INR 10 crores kind of a number or this kind of a number is a normalized one can look at?

You can start seeing from next year. It is not in this quarter because this quarter, we have to wipe out the small borrowing what we have taken. So the interest cost will come down, finance costs will come down. And the finance cost is, again, a combination of actual borrowing as well as India's accounting [indiscernible] lease accounting also.

And even for profit from associates, sir, for 9 months also significantly from INR 88-odd crores, INR 50-odd crores, has come down...

Supreme Petrochem results, as you have seen yesterday to the expectation level what we expect. And this is the result of that one.

Our next question comes from the line of Praveen Sahay from PL Capital.

Can you give the capacity number for all the 3 verticals and as well as the kind of a CapEx you had done, what kind of capacity you are looking for FY '27 for all 4 [ verticals. ]

For FY '27, we will talk in April.

So right now, if we can [indiscernible]

As mentioned last time also, piping -- plastic piping will be 1 million tonnes. And other 3 segments, Packaging, Industrial...

We will talk in April only.

So total will be [ 12.2. ] So there is not much addition into the other segment.

Okay. Okay. Got it, sir. Second question is related to the cylinder. So that's -- you had mentioned that [ 2 lakh ] of cylinders already executed and the 2 lakh of LOI you have. How much of the revenue you have generated and expected from the pipeline of LOI?

No, I think we have mentioned into the declaration [indiscernible], which is also this 2 lakh cylinder will generate revenue around INR 54 crores.

INR 54 crores you had already generated with the execution of 2 lakh cylinder of LOI.

Correct.

And the similar amount you are expected to do again?

Correct.

Our next question comes from the line of Utkarsh Nopany from Anand Rathi.

Sir, my first question is related to the plastic demand scenario...

Your voice is not clear. Can you just repeat the question, not clear.

Hello? Yes, sir. Am I audio right now?

Yes, please.

Yes. Sir, what I wanted to understand on the demand side. So in the opening remarks, it was mentioned that the Plastic pipe demand is now coming back to the normal feed. So in this context, I want to understand whether we meant that the channel has started refilling inventory or we are also seeing signs of demand improvement at end consumer level in the January month compared to the previous December quarter?

Normal demand started coming up and you are right. The destocking was taken to a very extreme level. So now because there is no -- the chance of some price going up also, the normal stocking has started and going to continue. Now this is the peak demand period from January to June on plastic piping system, pre-demand period.

Sir, so like are we seeing signs of improvement in demand for plumbing and infra pipe in the January month compared to December quarter period, sir?

We are finding improved demand.

Okay. And sir, like in the press release, it was mentioned that we are planning to put up a greenfield plant in FY '27. So sir, can you please provide some more details regarding the location and the time line of those new plants?

Two plants. One is near [indiscernible]. And other plant near -- in Bihar near Patna.

Okay. And sir, those plants are expected to become operational in FY '27?

This should be operational by FY '28.

Our next question comes from the line of Sonali from Jefferies.

Sir, I have only one question. So PVC price has again from point to point, from October to December, it's gone down by about 7% Q-o-Q. I'm sure there would have been some element of inventory loss this quarter. So is it possible for us to quantify that?

Very difficult to -- overall it's not only in PVC, the polymer prices have gone down across the board, all the polymer, PVC, polyethylene, polypropylene, CPVC, all polymer prices have gone down. We believe in first 9 months company might have taken a hit of between INR 100 crores to INR 120 in 9-month operation, which resulted in our giving lower guidance of operating margin.

Understood, sir. Sir, and just one more, if I may. In the remarks that Mr. Somani said about the higher interest cost we said that we had short-term borrowings for the funding. So is this regarding the Wavin funding that we spoke about?

No [indiscernible] it was a very small amount of INR 132 crores, and now they are being paid.

Understood. And we are -- the interest cost is likely to normalize from Q1 FY '27. Is that right?

Yes, yes. No doubt it.

Our next question comes from the line of Rahul Agarwal, Ikigai Asset.

Sir, just wanted to know your thoughts on the industry for the entire PVC industry. If you look at the 9 months gone by, any comments could you offer on how the PVC industry would have grown and market share for Supreme because Supreme overall has grown 10% on volumes in 9 months, what could be the volume growth for the industry? And are smaller players losing market share...

Industry growth you can get from raw materal producer.

Sure, sir. Have we seen any...

The growth of the Supreme Industries.

Yes, sir. I understand that. Anything on the smaller player side? Is there consolidation in the industry?

We know our shares have gone up [indiscernible]

Our next question comes from the line of Keshav Lahoti from HDFC Securities.

Just a follow-up. As I -- have I understood correctly, so your interest cost, which has increased in this quarter to INR 12 crores, possibly will reduce in Q4. And maybe from FY '27 onwards, the quarterly, the rate would be [indiscernible]. Is this a fair assessment?

You're right.

Okay. And how is the other income [Technical Difficulty], which have taken [Technical Difficulty] which used to be INR 15 crores or will this come up in Q4 and possibly maybe FY '27 some [ cut-off ] guidance?

As I mentioned, this is not a core activity. It was deployment of surplus funds available in hand. Since we are using money for our businesses. So again, depends the opportunity for the business -- it all depends upon the availability of liquid funds in hand.

Understood it. What I'm trying to get is, is it due to working capital possibly there was some [Technical Difficulty]

Absolutely, absolutely. For the current [Technical Difficulty] optimally, the working capital has been increased, particularly on the inventory side, not on the receivables, which will come down once the fourth quarter is over.

Understood. Got it. Earlier you have sort of indicated your CPVC volume growth was 26% in H1. How has been the growth in this quarter?

Total growth in 9 months is 30%.

30%, implying 40% kind of CPVC volume growth in Q3.

In 9 months, we have grown 30%.

Got it. One last question from my side, sir, how is the channel inventory possibly? Can you compare how was the channel inventory at September and how has it moved in December? And how is it moving now in January when PVC prices are rising -- started to rise?

We don't know. But we only know that when they place the order, they've gone following very vigorously [indiscernible]

Our next question comes from the line of Sneha Talreja from Nuvama.

While most of the question [indiscernible] I just wanted to get a sense on demand. How are we seeing [indiscernible] demand at this point of time? And how do you see it moving from various segments like PVC, cPVC, in case you can give some numbers there?

No, demand for plastic piping system, demand for every product is reasonably good now. The economy is growing well and product prices have gone quite low. And the demand for housing, agriculture, infrastructure are going quite well now.

Yes. But if at all, we have to put some volume numbers in place that how much would be industry demand volume growth? It would be 8% to 9% or probably 10% to 12%, some sense there would be helpful.

We told that piping system will grow between 15% to 17%, which just necessarily means [Technical Difficulty]

Sir, I was speaking more from the industry perspective, industry growth. This is your outperformance over industry, but how much industry...

[indiscernible]

Our next question comes from the line of Meet Jain from Motilal Oswal.

So I have one question regarding the capacity that you are setting up in FY '27. Can we get the understanding how much capacity are we setting out across 2 locations?

We are trying to add 100,000 tonnes overall as on today. [indiscernible] in the month of April.

Okay. And it will include all the PVC, CPVC numbers [indiscernible] products as well?

All product segment what we are dealing in plastic piping system -- [indiscernible] other products also. We will share with you in the month of April.

Understood. Also, sir, in terms of the industry so one thing that we are hearing about this China have been lifted the export [indiscernible] that they were offering to the exporters. And from the understanding that we are seeing the prices of PVC can increase going ahead. So can you comment on that?

Already, the international offer which are coming to India are already high. As I told earlier, it has gone down up of to $580 [indiscernible] India. And now you cannot get any booking below $650. So price bottom level has gone up by $70 in last 1.5 months. So the trend has been reversed. Now so many producers [indiscernible] causing too many capacity we're running at low capacity and some plants [indiscernible] closed also. The demand supply balance has now started. The people don't want to go on making polymer, they are losing money.

Our next question comes from the line of Tejas Pradhan from Citigroup.

Most of my questions were already answered, but just as a continuation of the last query. So going forward, how much increase would you expect in domestic PVC prices? I mean, I know you mentioned $70 increase has already happened. Do you think this is the quantum of increase or further increase is also possible?

In such an uncertain atmosphere in the world, how can you forecast the price [indiscernible]. We are incapable to do it. We only know very well now that the price erosion has been [indiscernible] and prices started going up. Now how much can go up? Very difficult to say. You can't forecast nowadays in such an uncertainty. So many [indiscernible] taking place. So many uncertainty. [indiscernible] complexity, such a business atmosphere. But we know that all the polymer producers, not only PVC polymer producers also, some people close their plant permanently. Some people temporarily closed, some people put their plant maintenance shutdown. Some people are running at low capacity because they are losing money. And you can't forecast about crude. Today, crude is around $60 to $64. Suppose crude price goes down to $40. Nobody knows what can happen to crude price. If that happens, then polymer price will go down for sure. Fuel price can go down to $40, which happened in 2008, who can forecast nowadays. Very difficult to forecast in such [indiscernible] world economy, you can't forecast.

Our next question comes from the line of Vipul Kumar Shah from Sumangal Investments.

Yes. So is it possible to share volume for CPVC volume for this quarter and 9 months?

9 months, we have grown by 30%.