CRISIL Report

The Supreme Industries Ltd

Enhancing investment decisions

Initiating coverage

© CRISIL Limited. All Rights Reserved.

Explanation of CRISIL Fundamental and Valuation (CFV) matrix

The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process –

Analysis of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental

grade is assigned on a five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The

valuation grade is assigned on a five-point scale from grade 5 (indicating strong upside from the current market price (CMP)) to

grade 1 (strong downside from the CMP).

CRISIL Fundamental Grade

Assessment CRISIL Valuation Grade

Assessment

5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP)

4/5 Superior fundamentals 4/5 Upside (10-25% from CMP)

3/5 Good fundamentals 3/5 Align (+-10% from CMP)

2/5 Moderate fundamentals 2/5 Downside (negative 10-25% from CMP)

1/5 Poor fundamentals 1/5 Strong downside (<-25% from CMP)

Analyst Disclosure

Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest

that can bias the grading recommendation of the company.

Disclaimer:

This Company-commissioned Report (Report) is based on data publicly available or from sources considered reliable by CRISIL

(Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for

any errors or omissions or for the results obtained from the use of Data / Report. The Data / Report are subject to change without

any prior notice. Opinions expressed herein are our current opinions as on the date of this Report. Nothing in this Report constitutes

investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold

any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this

Report. This Report is for the personal information only of the authorized recipient in India only. This Report should not be

reproduced or redistributed or communicated directly or indirectly in any form to any other person – especially outside India or

published or copied in whole or in part, for any purpose.

The

© CRISIL Limited. All Rights Reserved. CRISIL RESEARCH | 1

July 14, 2011 Fair Value Rs 239 CMP Rs 192 Fundamental Grade 4/5 (Strong fundamentals)

Valuation Grade 5/5 (CMP has strong upside)

Industry Information technology

Polaris Software Limited

Business momentum remains intact

Fundamental Grade 4/5 (Superior fundamentals)

Valuation Grade 4/5 (CMP has upside)

Industry Chemicals

The Supreme Industries Ltd Maintaining its supreme-acy in plastics

The Supreme Industries Ltd (Supreme) is India’s largest plastic products

company. It has a well-diversified product portfolio comprising i) pipes and

fittings, ii) consumer products, iii) packaging products and iv) industrial

products. CRISIL Equities expects the growth in demand for plastic products in

India augurs well for the company, which is gearing up for growth with an

aggressive expansion plan. We assign Supreme a fundamental grade of 4/5, indicating that its fundamentals are superior relative to other listed securities in India.

Reigning “supreme” over the Indian plastic products industry Supreme is the largest player in the highly unorganised plastic products

industry in India. Over the past 45 years, the company has diversified its

products over various segments and occupies a prominent position in most of

them. The company is well-placed to benefit from the rising demand for plastic

products in India, which is expected to double from 8 million tonnes at present

to 16 million tonnes by 2018.

Consistent diversification and innovation are Supreme’s key strengths One of Supreme’s key strengths is its ability to constantly move away from

competitive segments into those where it can have the first mover advantage.

With constant innovation, the company has successfully kept pace with

technological improvements and churned its product portfolio to include more

of premium, value added products, to maintain its strong competitive position.

Raw material price and competition remain key monitorables Prices of key raw material like PVC resin, polypropylene and polyethylene are

primarily linked to crude oil and subject to volatility. While the company is

likely to pass on any increase in raw material costs in their value added

products, margin expansion in the more competitive and commoditised

products categories may be restrained. Further, with intensifying competition,

timely diversification into newer product categories will be key to maintain

margins as well as market position.

Expect three-year revenue CAGR of 19% We expect revenues to register a three-year CAGR of 19% to Rs 33.5 bn in

FY13 driven by growth across product segments. While EBITDA margin for

plastic products is expected to remain at 14-15%, profits from the one-off real

estate project will increase the overall EBITDA margins, in FY12 and FY13. EPS

is expected to increase from Rs 12.2 in FY10 to Rs 22.8 in FY13.

Valuations – the current price has ‘upside’ CRISIL Equities has used the discounted cash flow method to value Supreme

and arrived at a fair value of Rs 239 per share. This fair value implies P/E

multiple of 10x FY13E EPS. The fair value estimate includes Rs 9.7 from

29.88% share of Supreme in Supreme Petrochem Ltd (Supreme Petrochem),

an associate company. We initiate coverage on Supreme with a valuation

grade of 4/5.

KEY FORECAST

(Rs mn) FY09 FY10 FY11E FY12E FY13E

Operating income 16,587 20,155 24,000 27,933 33,543

EBITDA 2,547 2,974 3,447 4,121 5,459

Adj Net income 852 1,555 1,855 2,126 2,890

Adj EPS-Rs 6.7 12.2 14.6 16.7 22.8

EPS growth (%) 76.2 82.6 19.3 14.6 36.0

PE (x) 7.6 9.3 13.2 11.5 8.4

P/BV (x) 2.1 3.5 4.6 3.8 3.1

RoCE (%) 33.2 38.4 39.0 36.2 41.2

RoE (%) 29.6 43.3 39.4 36.4 40.2

EV/EBITDA (x) 3.5 5.6 7.9 6.8 5.1

NM: Not meaningful; CMP: Current Market Price, Financial year ending June

Note: Financials have been adjusted for a 5-for-1 stock split in October 2010.

Source: Company, CRISIL Equities estimate

CFV MATRIX

KEY STOCK STATISTICS NIFTY/SENSEX 5585/18554

NSE/BSE ticker SUPREMEIND

Face value (Rs per share) 2

Shares outstanding (mn) 127.0

Market cap (Rs mn)/(US$ mn) 24,402/547

Enterprise value (Rs mn)/(US$ mn) 26,506/594

52-week range (Rs) (H/L) 192/136

Beta 0.5

Free float (%) 50.4%

Avg daily volumes (30-days) 110,543

Avg daily value (30-days) (Rs mn) 19.8

SHAREHOLDING PATTERN

PERFORMANCE VIS-À-VIS MARKET

Returns

1-m 3-m 6-m 12-m

SUPREME 7% 24% 31% 67%

NIFTY 2% -6% -3% 3%

ANALYTICAL CONTACT

Sudhir Nair (Head) [email protected]

Niyati Dave [email protected]

Bhaskar Bukrediwala [email protected]

Client servicing desk

+91 22 3342 3561 [email protected]

1 2 3 4 5

1

2

3

4

5

Valuation Grade

Fundam

enta

l G

rade

Poor Fundamentals

ExcellentFundamentals

Str

ong

Dow

nsi

de

Str

ong

Upsi

de

49.6% 49.6% 49.6% 49.6%

3.9% 4.1% 4.2% 6.8%0.4% 0.5% 1.1%

1.3%

46.0% 45.8% 45.1% 42.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jun-10 Sep-10 Dec-10 Mar-11

Promoter FII DII Others



Table 1: Supreme: Business environment

Product /

Segment Plastic pipes and fittings Packaging products Consumer products Industrial products

Revenue

contribution

(FY10)*

39.7% 22.8% 10.5% 18.9%

Revenue

contribution

(FY13E)*

40.3% 22.2% 11.4% 18.0%

Product /

service offering

PVC, CPVC, PPRC and

HDPE pipes, injection

moulded and handmade

fittings

Performance films,

protective packaging films,

cross laminated films

Moulded furniture and mats • Moulded parts like

dashboards and other

interior and exterior parts

for automobiles

• Plastic body for consumer

durables

• Material handling

products like pallets,

crates and bins

Market position Second largest player with

18% of the organised

plastic pipe market

• 33-39% market share

across various products

in protective packaging;

market leader in cross

laminated films

Second largest player with

15% market share

18% market share in

material handling products;

preferred supplier to OEMs

Sales growth

(FY08-FY11E –

3-yr CAGR)

28.8% 19.7% 20.3% 20.7%

Sales forecast

(FY11E-FY13E –

2-yr CAGR)

15.1% 16.3% 21.4% 15.5%

Demand drivers • Government's thrust on

development of irrigation

facilities and urban

sanitation

• Demand for pipes for new

houses

• Replacement demand

from GI pipes in housing

and industry

• Protective packaging -

Growth directly linked to

growth in varied end

user industries such as

manufacturing, white

goods, automobiles, etc

• Performance films -

Increasing thrust on

packaged food

• Urbanisation and rising

per capita income in rural

and semi-urban segments

• Increasing acceptance of

plastic furniture among

tier 2 and tier 3 cities in

India

• 12-13% growth in

automobile industry over

FY11-13 to boost demand

for plastic components

• Rising income levels to

boost consumer durables

industry

• Soft drinks industry to

grow at over 20%

Key competitors • PVC - Finolex Industries

Ltd, Chemplast Sanmar

Ltd, Kriti Industries India

Ltd, Tulsi Extrusions Ltd,

Jain Irrigation Systems

Ltd

• CPVC - Astral Polytechnik

and Ashirvad Pipes

6-7 large players and

other unorganised players

• Nilkamal, which has a

30% share

Large and mid-sized

competitors such as Tata

Auto Comp Systems Ltd,

Varroc Group, Motherson

Sumi Systems Limited,

Sintex Industries Ltd,

Mutual Industries Ltd

Key risks • Entry of new players in

plastic pipes segment

• Raw material price

fluctuations

• Increasing competition in

some segments,

necessitating entry into

new categories


fluctuations

• Competition


fluctuations

• Client-specific demand

and off take risk since

company has dedicated

plants for certain clients


fluctuations

*Balance constitutes “Others” which includes income from trading of raw materials and real estate project

Source: Company, CRISIL Equities



Grading Rationale

Reigning “supreme” over the Indian plastic products industry

Supreme is a dominant player in the Indian plastics industry, with more than

7,000 industrial as well as consumer products categorised into i) pipes and

fittings, ii) consumer products, iii) packaging products and iv) industrial

products. Plastic pipes and fittings is Supreme’s largest segment constituting

40% of revenues. Supreme is a prominent player in most of these product

segments despite its diverse product range. The company has largely a

domestic focus with exports constituting a negligible portion of its business.

Supreme has the largest polymer processing capacity in India at 328,650

tonnes. The plastic products industry in India is highly fragmented, with the

unorganised segment constituting 60% of the market.

Diversified product range is Supreme’s forte

Supreme has, over a period of time, established itself as a diversified plastic

products company by innovating and coming up with new products and

applications of polymers. The company has also been successfully adding new

high value added products. This diversified product portfolio protects the

company from major threats to any single product.

Fig 1: Segment wise revenue break up (FY10)


Well-placed to ride the growth in Indian plastic consumption

Indian plastic consumption has grown at a CAGR of 10% over the past 10 years

largely due to growth in end-user segments such as industry, automobiles,

consumer durables, agriculture, infrastructure, housing etc. Given the low

penetration of plastics in India as compared to other countries, plastic demand

in India is all set to grow.

Plastic pipes and

fittings40%

Consumer

products10%

Packaging

products23%

Others (including

commercial real estate)

8%

Industrial

products19%

Supreme has the highest

polymer processing

capacity in India at

328,650 tonnes

Low per capita polymer

consumption, indicates

plenty of room for plastic

consumption to grow



Table 2: International comparison of polymer consumption

Per Capita Polymer consumption kgs

US 71.5

China 30.7

Brazil 22.7

India 5.7

Source – Industry sources, CRISIL Equities

Replacement demand to support growth

Plastics have been rapidly replacing conventional materials such as steel, glass,

paper, iron, aluminium and leather largely due to its cost effectiveness and

durability. For instance, plastic pipes have replaced almost 80% of galvanised

iron (GI) pipes in plumbing since GI has zinc-oxide and corrodes over time.

Similarly, plastic tarpaulins are fast replacing conventional cotton tarpaulins

since there is a marked cost differential and frequency of replacement is also

low. Going forward, as newer applications of plastics find a wider acceptance

among the end users, total plastic consumption in India is expected to double

from the present 8 million tonnes to 16 million tonnes by 2018 and 20 million

tonnes by 2020. With a prominent presence in plastic products, Supreme is well

poised to benefit from this growth in consumption of plastics.

Second largest player in plastic pipes

Supreme is one of the largest players in manufacturing of plastic pipes and

comes a close second to Finolex Industries Ltd. The company has 18% share of

the organised plastic pipe market (7.3% of overall market) estimated at Rs 110

bn.

Supreme manufactures a wide range of pipes including PVC, CPVC, PPRC, HDPE

(High Density Polyethylene) and LLDPE pipes, which have applications in

housing, rainwater drainage as well as irrigation. The company markets its pipes

under various brand names such as Aqua Gold, Indo-green, Eco-drain, etc;

some of these have a good brand recall and a loyal customer base. CPVC pipes,

which are used in hot and cold water plumbing, are gaining increasing

acceptance due to reliability and durability, recording 100% y-o-y growth for

the past two years.

Plastic is fast replacing

many conventional

materials

Supreme has a diverse

piping products portfolio



Fig 2: Supreme’s pipe portfolio (FY11E) Fig 3: Supreme - Pipes by end-use (FY11E)

Source: Company, CRISIL Equites Source: Company, CRISIL Equities

Demand for PVC pipes to grow at 10% CAGR

The Indian pipe industry is dominated by plastic pipes, within which PVC pipes

are the most prominent. The proportion of plastic pipes in the overall pipe

industry is expected to increase further driven by:

Replacement demand – Plastic pipes are rapidly replacing cement and GI

pipes (which cost twice as much as PVC pipes and last half as long) in housing

applications.

New demand - Construction of new houses is creating a robust demand for

plastic pipes. Also, higher government thrust on irrigation is creating a pull for

PVC pipes.

Fig 4: Indian pipe market (4.7 mn tonnes) Fig 5: Indian plastic pipe market (1.7 mn tonnes)

Source: Industry sources, CRISIL Equities Source: Industry, CRISIL Equities

Moulded plastic furniture - another segment with a strong foothold

Supreme is one of the largest players in manufacturing moulded plastic

furniture, second only to Nilkamal Ltd. The estimated market size of moulded

furniture industry is Rs 16 bn with Supreme having a market share of 15%.

(against Nilkamal’s ~30%). The company manufactures and sells commodity

PVC

72.3%

CPVC

9.8%

CPRC

6.9%

Fittings

11.0%

Housing

29.4%

Sewerage

&rainwater drainage

29.4%

Agriculture

and infrastructure

41.2%

Cement

12.3%

Plastic

34.8%

Steel (SAW)

27.2%

Steel (ERW)

7.4%

Ductile Iron

18.4%

Polypropylene

1.0%

CPVC

1.0%

PVC

86.0%

Polyehylene

12.0%

Demand for piping

products from housing

and irrigation segments

to be robust

Supreme is the second

largest player in moulded

plastic furniture segment



furniture (plastic chairs, stools), which comprise 70% of total furniture sales,

while the remaining consists of high-margin premium furniture (sofa sets,

tables, office furniture, etc). While the commodity furniture is mainly sold

through dealers, the premium furniture are marketed mostly through retail

outlets.

Sales of premium furniture to grow faster

Supreme markets its premium furniture through more than 200 pan-India

showrooms, where plastic furniture is displayed alongside steel and wood

furniture. With rising income levels in Tier 2 and Tier 3 cities, and increased

penetration of plastic furniture, this segment is likely to grow faster than

commodity furniture.

Dominant player in packaging products Supreme is a dominant player in the packaging products segment, which

constitutes 23% of its business currently. Under this segment, it manufactures

i) cross laminated films, ii) protective packaging products (PE foam, bubble

wraps, cross linked foam) and iii) performance films (extruded plastic sheets

used for packaging). These products find applications in protective packaging of

food, industrial goods, household appliances, automobiles, etc.

Fig 6: Supreme – Packaging products portfolio (FY11E

revenues)


Only Indian player manufacturing cross-laminated films

Supreme is the only Indian company to have the technology to manufacture

cross laminated XF films under the brand name “Silpaulin”. Technology for this

product has been acquired from a Switzerland-based company, Rasmussen

Polymer Development. Supreme has the sole rights for manufacturing and

marketing this product in India and South Asia.

XF films are used for a variety of applications - agricultural applications such as

pond lining, covering of agriculture produce, cattle sheds; civil engineering

applications such as basement capping, swimming pool capping, and general

applications such as covering of raw materials, machinery etc. The USP of the

Cross laminated

Films54%

Protective

Packaging Products

31%

Performance

films13%

Others

2%

Supreme is sole

manufacturer and

supplier of cross

laminated films in India

and South Asia



product is that it is one-seventh the weight of conventional cotton tarpaulin, but

has a high strength-to-weight ratio. However, the company has been unable to

fully tap the potential of the product due to paucity of semi-skilled labour,

especially in fabrication. To overcome this, the company is trying to partially

automate the fabrication process, resulting in less manual intervention.

Protective packaging – leading player in a highly

competitive industry

Supreme has a basket of protective packaging products including thermoplastic

polyethylene foam sheets and profiles, cap cells, cross-linked and blending PE

foams, air bubble films and customized products including foam and bubble

films that are corrosion resistant, anti-static, UV resistant and metal laminated.

Supreme has a 33-39% market share in various categories of protective

packaging products. Around 35% of the business comes directly from OEMs

while the rest is distributed through dealers. Since this segment has many

products which are low-value adding and the company has to compete with a

large number of unorganised players, these products typically have lower

margins (10-12%).

Table 3: Market share in protective packaging products

Products

Estimated Market

Size (Rs mn)

Supreme's Share in

FY10 (%)

EPE Foam 2200 39%

Air Bubble Film 1600 33%

Cap Cell 2100 33%


Performance films – low margin, low focus

Performance films are extruded plastic packaging films used for food items,

largely edible oil (~40% of revenues from the segment). Supreme supplies

performance films to clients such as Ruchi Soya Industries Ltd, Adani Wilmar

Ltd, Cargill Oil (for the Gemini refined oil products), etc. It is a highly

competitive segment and entails relatively lower EBITDA margins of ~10%.

Within this segment, the company has been able to maintain margins by

gradually exiting competitive segments such as two-layer films, while entering

higher value added segments such as seven-layer films.

Industrial products – catering to an elite client base

In the industrial products segment, Supreme manufactures dashboards for

automobiles, plastic body for electronic appliances as well as material handling

products. The estimated market size of the segment is Rs 200 bn. In this

competitive segment, Supreme is the preferred supplier to an elite corporate

clientele.

Supreme is the preferred

supplier to renowned

players in the automobile

and electronics space



Table 4: Industrial products – snapshot

Product categories % of FY11E revenues Clients Comments

Moulded parts like dashboards

and other parts for automobile

interiors and exteriors

44

Mahindra and Mahindra Ltd,

Maruti Suzuki India Ltd, Tata

Motors Ltd

Is the major supplier of plastic

parts for Tata Motors’ “Prima” at

Jamshedpur

Plastic body for consumer

durables 22

Hitachi India Pvt. Ltd, Samsung

India Electronics Ltd, Tata

Chemicals Ltd, Whirlpool India

Ltd

Largest player in the consumer

durables segment, is the major

supplier to Samsung (India) for

plastic requirements ranging

from television sets to

computers, is the sole supplier

for complete plastic requirement

for washing machine model

“Radiance” for Whirlpool India

Ltd

Material handling products like

pallets, crates and bins. 34

Coca Cola India, Hindustan

Unilever Ltd, Pepsico India

Reliance Retail

Largest supplier of bottle crates

to the soft drinks industry

Source – Company, CRISIL Equities

To provide customised and dedicated products to large clients, the company

also has dedicated plants – in Khushkheda (Rajasthan) for Maruti, in Puducherry

for Whirlpool, and in Sriperumbudur for Samsung.

Composite products – Supreme still has some way to go Composite products refer to products manufactured using non-plastic materials

along with plastic, largely fibre glass. Supreme has plans to invest Rs 650 mn

in setting up a manufacturing unit for composite LPG cylinders, having capacity

of 400,000 cylinders. These are explosion-free, translucent and light-weight

cylinders, which will be sold directly to oil marketing companies, to replace

conventional LPG cylinders. Although the Government of India has expressed

interest to procure composite cylinders, progress has been slow and no tenders

have been floated yet. Till the clarity on the regulatory front emerges and

domestic demand picks up, the company will explore export markets for the

same. Supreme will get technical know-how from European consulting firm(s)

and expects to commence production of cylinders by December 2011. A few

other Indian players such as Time Technoplast Ltd are also eying the composite

LPG cylinders space; however, we believe product acceptance is still some way

off.

Composite products

industry is still nascent

in India



Product diversification and innovation give Supreme the edge One of Supreme’s key strengths is the company’s ability to constantly move

away from competitive segments, into those where it can have first mover

advantage. Among the many firsts, Supreme was the first in the industry to use

the high-end injection moulding technology in the manufacturing process in

consumer products. Likewise, the company has introduced various technologies

in the market, either through international tie-ups or on its own, such as:

• Instant polyurethane foams, sound absorbing open cell foam, high

temperature and fire resistant foam in protective packaging

• SWR drainage systems, Aqua Gold high pressure plumbing system, Indo-

Green PP-R hot and cold water system in the plastic piping division,

• Lacquered and upholstered furniture in the furniture segment

• Injection moulded plastic pellets for industrial products

Continuous portfolio churn with new products

With constant innovation, the company has successfully kept pace with

technological improvements and churned its product portfolio to include less of

commoditised products and more of premium, value added products. For

instance, the company was, at one time, the largest supplier of plastic sheets

for milk packets (over 90% market share). But, as competition intensified, the

company began reducing its exposure to the milk packaging segment and

entered the 5-layer film segment (edible oil packaging) and even the 7-layer

film segment; currently, milk packaging makes negligible contribution.

Supreme scores higher than peers on operational and return parameters Supreme has superior returns and working capital management compared with

its peers in the plastic products industry. While, some of them are not strictly

comparable since they may be backward integrated (such as Finolex) or may

compete with Supreme in only a single product category (such as Nilkamal),

they are more or less comparable with Supreme.

Supreme has been the

first mover in many new

product segments, which

helps it to gain the

requisite market share



Fig 7: Supreme has relatively lower revenue

growth...

Fig 8 : ...and lower EBITDA margins

Source: Industry sources, CRISIL Equities Source: Industry sources, CRISIL Equities

Fig 9: ...but returns are considerably higher than

peers’

Fig 10: ...due to excellent working capital

management

Source: Industry sources, CRISIL Equities Source: Industry sources, CRISIL Equities

*Kemrock Industries data is for 15 months.

Intense competition will keep Supreme on its toes The competitive nature of the plastic-based industry requires nimble response

to changes in market trends and timely exit from the more competitive

segments. In the past, Supreme had to sell off lower-margin businesses such as

food service wares (plastic cups), BoPP and rigid PVC film, where competition

was pulling down margins. While Supreme already faces competition from the

unorganised market in various product segments, the entry of newer players in

segments such as PVC pipes (where large steel pipe makers are eyeing the PVC

space) and consumer products is expected to further intensify competition. In

an intensifying competitive scenario, sustaining the pace of growth through

constant product innovation will be key.

20,15514,527

10,950 10,003 32,816 6,078

20%

12%

29%

36%41%

63%

0%

10%

20%

30%

40%

50%

60%

70%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Supreme

Industries

Finolex

Industries

Nilkamal

Time

Technoplast

Sintex

Industries

Kemrock

Industries*

(Rs mn)

Revenue (FY10) 3-yrs revenue growth (FY07-10)

14.8

21.9

12.2

19.5

15.3

25.2

0

5

10

15

20

25

30

Supreme

Industries

Finolex

Industries

Nilkamal Time

Technoplast

Sintex

Industries

Kemrock

Industries*

(%)

EBITDA margin (FY10)

0

5

10

15

20

25

30

35

40

45

10 15 20 25 30 35 40 45

RoCE (%)

RoE (%)Supreme Industries Finolex Industries

Nilkamal Time Technoplast

Sintex Industries Kemrock Industries*

22

14

81

107

97

229

0 50 100 150 200 250

Supreme Industries

Finolex Industries

Nilkamal

Time Technoplast

Sintex Industries

Kemrock Industries*

Working capital days (FY10)

Competition is expected

to intensify both from

organised and

unorganised players



Rising raw material price is a risk The main raw materials used across segments are PVC, polypropylene, LD, LLD

polyethylene and High Density Polyethylene (HDPE). All, except PVC – which is

48% chlorine - have a strong linkage with crude oil. While the company is

successfully able to pass on raw material price increases in its more value added

products, a sustained increase in raw material prices can have an impact on

margins of the more commoditised products.

Supreme has a clearly laid out expansion plan to tap the growth opportunity in plastics Supreme has chalked out a well laid out expansion plan across products to tap

the growth opportunity that lies ahead. The company plans to increase the

number of plants from 19 currently to 32 by FY15. The company has also

zeroed in on the proposed locations for the expansion. To this end, the company

expects to incur a capex of ~Rs 2000 mn each year till FY15 across various

product segments.

Funding of capex not a concern

Supreme has strong operating cash flow given a lean working capital cycle. The

company will be able to fund its future expansion from these cash flows and will

not require any dilution of equity. Sales from the real estate project will also

provide the necessary funding support.

Real estate project is a one-off venture Supreme has developed a commercial real estate project in Andheri, Mumbai.

The project was undertaken to unlock the value in the company’s factory plot

located in Mumbai. With help from R. Raheja Group (who are equal partners

with The Supreme Industries Ltd in Supreme Petrochem Ltd), the company

executed the commercial real estate project, at a total cost of Rs 1,550 mn. The

project is spread over a 2.65 lakh sq ft, of which 40,000 sq ft has already been

sold for ~Rs 600 mn. While the management has indicated that the balance will

be sold in 2011, given the prevailing slowdown in the real estate market, we

believe the same may happen in the next two years. Proceeds from the sale will

help fund the company’s capex requirements.

Prospects of Supreme Petrochem appear good Supreme has a 29.88% stake in Supreme Petrochem, a listed company, in

which the R. Raheja Group also has a 29.88% stake. Supreme Petrochem’s

FY10 revenues stood at Rs 16,154 mn, with a PAT of Rs 605 mn. Supreme

Petrochem is one of the largest single-site polystyrene producers globally,

accounting for 2% of world capacity. The company owns 60% of domestic

installed capacity of polystyrene at 2,72,000 tonnes and is further expanding

capacities with a capex of Rs 1250 mn in FY11, due to strong international

demand for polystyrene. We expect Supreme Petrochem’s PAT to grow at a

CAGR of 12% in FY11-13, consequently supporting Supreme’s profits.

Sales from the real

estate project will take

some time to complete



Key risks

Increasing raw material price

PVC resin (48% chlorine and 52% petrochemicals), one of the key raw material

used by Supreme, constitutes ~45% of total raw material costs. Any major

fluctuation in crude prices will have a corresponding impact on prices of PVC as

well as other raw materials that the company uses. Price of other crude-linked

materials, such as polyethylene and polypropylene, will also be a key

monitorable.

Delay in capacity expansion plan The company has outlined capacity expansion to the tune of ~Rs 2,000 mn each

year. Any delay in commissioning of these capacities may have an impact on

the financial performance of the company.

Delay in sale of commercial real estate project Given the prevailing slowdown in the real estate market, we remain cautious

about the timing of cash flows from sale of the company’s commercial real

estate project. Any further delay in sales could have an impact on our cash flow

assumptions which may affect our valuation estimates.

Intensifying competition Since Supreme operates in a highly competitive market, which is also

dominated by a large number of unorganised players, intensifying competition

in any product category, if not adequately countered by a corresponding

introduction of innovative products, will limit the company’s ability to maintain

margins in the 14-15% range.

Forex fluctuations The company imports ~50% of its raw material and also has foreign currency

borrowings. While the management has indicated that all forex transactions are

sufficiently hedged, they remain a monitorable.

Raw material price and

competition are key

monitorables



Financial Outlook

Revenues to grow at three-year CAGR of 19%

We expect revenues to grow at 19% CAGR in the next three years led by

growth across all the product segments. Growth will be primarily driven by

volumes. We expect the revenue mix (excluding real estate income) to remain

largely unchanged.

Fig 11: Expect strong growth in revenues Fig 12:Revenue mix to remain unchanged in FY13

Source: Company, CRISIL Equities Source: Company, CRISIL Equities

Core business EBITDA margins to remain stable at around 14% Supreme reported an EBITDA margin of 14.8% in FY10 and 14.6% in the nine

months ended March 2011. While the company is continuously expanding its

range of value added products in most of the segments, we believe intensifying

competition will put pressure on the company’s core business margins,

restricting margin expansion. At the same time, in FY12 and FY13, revenues

from the real estate project will cause EBITDA margins to expand briefly, before

returning to the ~14% range, once the sale is through.

Fig 13: EBITDA margins to expand due to real estate sale


16,587 20,155 24,000 27,933 33,543

26.4%

21.5%

19.1%

16.4%

20.1%

0%

5%

10%

15%

20%

25%

30%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

FY09 FY10 FY11E FY12E FY13E

(Rs mn)

Revenues growth % (RHS)

Plastic pipes

and fittings40%

Packaging

products22%

Consumer

products12%

Industrial

products18%

Others

8%

2,547 2,974 3,447 4,121 5,459

15.4%

14.8%

14.4%

14.8%

16.3%

13%

14%

14%

15%

15%

16%

16%

17%

0

1,000

2,000

3,000

4,000

5,000

6,000


(Rs mn)

EBITDA EBITDA Margin (RHS)

Revenues likely to grow at

a three-year CAGR of 19%

to Rs 33.5 bn in FY13



Raw material price risk does not seem imminent

CRISIL Research expects crude prices to soften from the current levels to

~US$100 per bbl in FY12 and US$90 per bbl in FY13 and chlorine prices (48%

of PVC cost) to remain stable over FY12-13, lowering the likelihood of a major

raw material price disruption on profitability.

Excellent working capital management

The company sells cross laminated films and a large portion of plastic piping

products on cash basis. The company has been able to consistently lower its

debtor days, despite adding new clients and new products. Supreme has also

managed to maintain its supplier days within a range through constant vendor

management. A lean working capital ensures that the operating cash flows of

the company are high resulting in its ability to fund the capacity expansion

through internal accruals without resorting to too much of debt.

Fig 14: Debtor days have been on a decline Fig 15:Inventory days also expected to decline

Note – Inventory decline is owing to realisation of proceeds from

real estate project


PAT to grow at a three-year CAGR of 23%, EPS to increase from Rs 12.2 in FY10 to Rs 22.8 in FY13

Supreme’s consolidated PAT is expected to grow from Rs 1,555 mn in FY10 to

Rs 2,890 mn in FY13, primarily driven by a strong growth in revenues, stable

EBITDA margins (excluding real estate project) and income from the real estate

project. EPS is expected to increase from Rs 12.2 in FY10 to Rs 22.8 in FY13.

Excluding the real estate project, we expect EPS to be Rs 18 in FY13.

40 38

25 24 24 24 24

0

5

10

15

20

25

30

35

40

45

FY07 FY08 FY09 FY10 FY11E FY12E FY13E

(Days)

Receivable days

43

5549

6862 58

43

0

10

20

30

40

50

60

70

80

FY07 FY08 FY09 FY10 FY11E FY12E FY13E

(Days)

Inventory days

Strong bottom-line

growth led by higher

operating profits and

comfortable interest

outflow



Fig 16: PAT and PAT margins to improve Fig 17: EPS to rise


RoE and RoCE to remain strong

Supreme had a strong RoE of 43% and RoCE of 38% in FY10. Given its strong

operational performance, we expect RoE and RoCE to remain at healthy levels.

Fig 18: RoCE and RoE to remain strong


852

1,5551,855

2,126

2,890

5.1%

7.7% 7.7% 7.6%

8.6%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0

500

1,000

1,500

2,000

2,500

3,000

3,500


(Rs mn)

PAT PAT Margin (RHS)

6.7 12.2 14.6 16.7 22.8

76%

83%

19%

15%

36%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0.0

5.0

10.0

15.0

20.0

25.0


(Rs mn)

EPS EPS Growth (RHS)

29.6

43.3

39.4

36.4 40.2

33.2

38.4 39.0

36.2

41.2

25

27

29

31

33

35

37

39

41

43

45


(%)

ROE ROCE

Higher returns and better

utilisation of existing

assets is expected to

maintain the RoE and

RoCE



Management Overview

CRISIL's fundamental grading methodology includes a broad assessment of

management quality, apart from other key factors such as industry and

business prospects, and financial performance.

Current management at the helm for 45 years

Supreme has a strong management team with excellent domain expertise. Mr.

M.P.Taparia (Managing Director, 74), Mr. S.J.Taparia (Executive Director, 66)

and Mr. V.K.Taparia (Executive Director, 56) are from the promoter family

actively engaged in the business currently, with an equal shareholding (~16%

each). The Chairman, Mr. B.L.Taparia, 77, is Mr. M.P.Taparia’s brother and Mr.

V.K. Taparia’s father. He currently works in a non-executive capacity. Since the

company was taken over in 1966, the Taparia family has been at the helm of

affairs. Apart from The Supreme Industries Ltd, Mr. M.P. Taparia is also the

Chairman of Supreme Petrochem Ltd, but more in an advisory role, while the

operations are managed by professionals. Apart from Supreme Petrochem Ltd,

the promoters do not have any other group company.

Although the company has not disclosed the plan for succession, we believe that

adequate thought is being given to the same.

Strong second line of management

The second line comprises seasoned professionals, all of whom have over 25

years of experience and most of whom have been with the company for over 20

years, some as long as 40 years. The company has profited from their vast

experience and keen understanding of their technical as well as marketing

expertise.

Strong focus on core competency, with steady and well-timed diversification

Over the past 10 years, the company’s PAT has grown at a 28% CAGR, largely

driven by growth in core operations. Most of the business growth has been

organic (the acquisitions the company had made were largely extensions of

their foam and films businesses, for instance Futuristic Packaging was taken

over for access to its 5-layer extrusion packaging technology). Also the

management’s focus has been the Indian market, with very little export

exposure and this appears to be the strategy going forward. The management

has also proceeded cautiously on new ventures and competitive new segments

such as drip irrigation, where dependence on tendering process and government

subsidy is high.

Shareholder – friendly management

Supreme has consistently rewarded shareholders, with an average dividend

payout of 35-40% of distributable profits, while maintaining the pace of growth.

Accompanied by a consistently improving RoE, a 5-for-1 stock split in October

2010 and seven instances of bonus since the Taparia family took over the

business in 1966, the returns to shareholders have been extremely rewarding.

The Taparia family has

largely focussed on the

business they know

best - plastics



Corporate Governance

CRISIL’s fundamental grading methodology includes a broad assessment of

corporate governance and management quality, apart from other key factors

such as industry and business prospects, and financial performance. In this

context, CRISIL Equities analyses the shareholding structure, board

composition, typical board processes, disclosure standards and related-party

transactions. Any qualifications by regulators or auditors also serve as useful

inputs while assessing a company’s corporate governance.

Overall, corporate governance at Supreme is good and is supported by good

board practices and an independent board.

Board composition

Supreme’s board comprises nine members, of whom five are independent

directors, which is more than the requirement under Clause 49 of SEBI’s listing

guidelines. Four directors are from the promoter family – Mr. B.L.Taparia

(Chairman – Non-executive), Mr. M.P.Taparia (MD), Mr. V.K. Taparia and Mr.

S.J.Taparia. The independent directors have strong industry experience and are

highly qualified. We believe they have a fairly good understanding of the

company’s business and its processes and their participation in Board meetings

is good.

Board’s processes

The company’s quality of disclosure can be considered quite good judged by the

level of information and details furnished in the annual report, websites and

other publicly available data. The company has all the necessary committees –

audit, remuneration and investor grievance - in place to support corporate

governance practices. The audit committee is chaired by an independent

director, Mr H.S.Parikh, who is a practicing Chartered Accountant.

Corporate governance

practices are good



Valuation Grade: 4/5

We have used the discounted cash flow (DCF) method to value Supreme and

arrived at a fair value of Rs 239 per share (this includes Rs 9.7 as share in

profits of Supreme Petrochem Ltd). Supreme is currently trading at Rs 192 per

share. Consequently, we initiate coverage on Supreme with a valuation grade of

4/5, indicating that the current market price has strong upside.

Key DCF assumptions

• We have considered the discounted value of the firm’s estimated free cash

flow from FY12 to FY18.

• We have included capital expenditure of ~Rs 2,500 mn annually from FY12-

18, including maintenance capex.

• We have assumed a terminal growth rate of 4% beyond the explicit

forecast period until FY18.

WACC computation

FY12-16 Terminal value

Cost of equity 15.3% 15.3%

Cost of debt (post tax) 8.2% 8.2%

WACC 12.7% 12.7%

Terminal growth rate 4.00%

Sensitivity analysis to terminal WACC and terminal growth rate

Terminal growth rate

Term

inal W

ACC

2.0% 3.0% 4.0% 5.0% 6.0%

10.7% 248 273 307 352 417

11.7% 219 238 263 294 337

12.7% 196 211 229 252 283

13.7% 177 189 203 221 243

14.7% 162 172 183 196 213

Source: CRISIL Equities estimates

Valuation of profits from Supreme Petrochem

We have valued Supreme’s 30% stake in Supreme Petrochem based on its

current market cap of Rs 5,800 mn. We have further applied a holding company

discount of 30% to arrive at a value of Rs 9.7 per share for Supreme

Petrochem.

This, along with Supreme’s DCF value of Rs 229 per share, gives a fair value of

Rs 239 per share.

We assign a fair value of

Rs 239 per share to

Supreme and initiate

coverage with a valuation

grade of “4/5”

The fair value implies P/E

multiple 10x FY13 EPS of

Rs 22.8



One-year forward P/E band One-year forward EV/EBITDA band

Source: NSE, BSE, Company, CRISIL Equities Source: NSE, BSE, Company, CRISIL Equities

P/E – premium / discount to NIFTY P/E movement

Source: NSE, BSE, Company, CRISIL Equities Source: NSE, BSE, Company, CRISIL Equities

Note: PE has been adjusted for bonus, stock split and buy back

Peer comparison

Company M.cap P/E RoE P/BV

(Rs mn) FY10 FY11E FY12E FY13E FY10 FY11E FY12E FY13E FY10 FY11E FY12E FY13E

Supreme Industries 21,849 14.1 11.8 10.3 7.6 43.3 39.4 36.4 40.2 3.5 4.1 3.4 2.7

Finolex Industries 9,501 6.1 14.2 na na 24.3 12.6 na na 1.4 1.7 na na

Nilkamal 3,772 6.4 8.0 5.3 na 22.2 17.4 17.0 na 1.3 1.3 0.9 na

Time Technoplast 14,189 15.8 13.9 9.6 7.9 17.1 16.4 20.1 20.2 2.5 2.1 1.8 1.5

Sintex Industries 45,303 12.2 9.0 8.4 7.2 18.0 21.2 20.1 19.4 2.1 1.7 1.5 1.2

Kemrock Industries 8,698 21.1 na na na 28.4 na na na 2.6 na na na

Median 14.1 12.8 9.6 7.7 23.7 19.3 20.1 22.1 2.5 1.9 1.8 1.9

Average 15.0 12.2 9.3 8.2 25.3 21.6 23.3 25.9 2.8 2.4 2.1 1.9

Note: Data is as of July 2011

Source: CRISIL Equities, Industry sources

0

50

100

150

200

250

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

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Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

(Rs)

Supreme Industries 1x 4x 7x 10x

0

5,000

10,000

15,000

20,000

25,000

30,000

Apr-07

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Oct-07

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Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

(Rs mn)

EV 2x 4x 6x

-90%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

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Oct-10

Jan-11

Apr-11

Jul-11

Premium/Discount to NIFTY Median premium/discount to NIFTY

0

2

4

6

8

10

12

14Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

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Oct-08

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Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

(x)

1yr Fwd PE (x) Median PE

+1 std dev

-1 std dev



Company Overview

The Supreme Industries Ltd is India’s leading plastic products manufacturer.

The company operates in the injection moulding and extrusion segments.

Supreme has the largest capacity in India, with 19 manufacturing facilities and a

pan-India distribution network. The company has an overseas subsidiary in the

UAE, which makes little contribution to revenues.

Company’s segment-wise capacities (mtpa) and capital expenditure plan

Division FY11E FY12E FY13E FY14E FY15E

Industrial Moulded Products 34,700 37,500 40,000 46,000 50,000

Plastic Piping System 190,000 207,500 247,500 300,000 360,000

Cross laminated Film 17,500 22,500 22,500 27,500 27,500

Protective Packaging Products 24,600 27,500 33,000 36,000 40,000

Furniture 29,320 40,000 45,000 48,000 54,000

Material Handling System 23,030 28,000 33,000 36,000 42,000

Packaging Film 9,500 9,500 15,500 15,500 21,500

Total Estimated Production Capacities 328,650 372,500 436,500 509,000 595,000

Total Capex Budgeted (Rs mn) 2,734 2,046 1,595 2,002 1,557

Source – Company

Proposed expansion of manufacturing facilities

Division No of new locations Proposed locations

Industrial Moulded Products 3 Ahmedabad, Jamshedpur and Puduchery

Plastic Piping System 2 East Zone, South Zone

Cross Laminated Film 1 Gujarat

Protective Packaging Products 4 Hosur, Gujarat, West Bengal and Rajasthan

Furniture 2 Andhra and North Zone

Composite cylinders 1 Halol (Gujarat)

Total 13

Source – Company

Technical collaborations

Company Country Product Line

Rasmussen polymer development Switzerland Cross-Laminated Films

Sapac packaging solution Belgium Instant Packaging Solution

Foam Partner Switzerland Reticulated PU Foam

Sanwa Kako Japan 2 Stage Foam

PE Tech Korea Cross Linked Foam

Wavin Overseas Holland Plastic piping system

Industrie Polieco MPB SRL Italy Sewerage system

Source – Company



Annexure: Financials

Note – Share of profits in Supreme Petrochem for Fy11E (included in “Other Income”) is for 9M ended March 2011, Financial year for

the company ends in June, Financials have been adjusted for a 5-for-1 stock split in October 2010.

Source: CRISIL Equities

Income statement Balance Sheet

(Rs mn) FY09 FY10 FY11E FY12E FY13E (Rs mn) FY09 FY10 FY11E FY12E FY13E

Operating income 16,587 20,155 24,000 27,933 33,543 Liabilities

EBITDA 2,547 2,974 3,447 4,121 5,459 Equity share capital 254 254 254 254 254

EBITDA margin 15.4% 14.8% 14.4% 14.8% 16.3% Reserves 2,787 3,887 5,031 6,139 7,745

Depreciation 525 529 563 781 953 Minorities - - - - -

EBIT 2,021 2,444 2,884 3,339 4,506 Net worth 3,041 4,141 5,285 6,393 7,999

Interest 681 339 330 415 458 Convertible debt - - - - -

Operating PBT 1,341 2,105 2,555 2,924 4,048 Other debt 3,250 2,291 3,091 3,691 3,791

Other income (2) 199 214 249 266 Total debt 3,250 2,291 3,091 3,691 3,791

Exceptional inc/(exp) 57 5 - - - Deferred tax liability (net) 643 698 698 698 698

PBT 1,396 2,309 2,768 3,173 4,314 Total liabilities 6,934 7,130 9,074 10,782 12,488

Tax provision 487 749 914 1,047 1,424 Assets

Minority interest - - - - - Net fixed assets 5,431 5,626 7,814 9,532 11,579

PAT (Reported) 908 1,560 1,855 2,126 2,890 Capital WIP 895 131 231 331 431

Less: Exceptionals 57 5 - - - Total fixed assets 6,326 5,757 8,045 9,863 12,010

Adjusted PAT 852 1,555 1,855 2,126 2,890 Investments 496 693 892 1,114 1,364

Current assets

Ratios Inventory 1,683 2,906 3,145 3,448 3,012

FY09 FY10 FY11E FY12E FY13E Sundry debtors 1,153 1,310 1,560 1,816 2,181

Growth Loans and advances 535 793 960 1,117 1,342

Operating income (%) 26.4 21.5 19.1 16.4 20.1 Cash & bank balance 870 187 331 211 584

EBITDA (%) 71.5 16.8 15.9 19.6 32.5 Marketable securities - - - - -

Adj PAT (%) 62.1 82.6 19.3 14.6 36.0 Total current assets 4,240 5,197 5,996 6,592 7,119

Adj EPS (%) 76.2 82.6 19.3 14.6 36.0 Total current liabilities 4,128 4,517 5,858 6,787 8,005

Net current assets 112 680 138 (195) (886)

Profitability Intangibles/Misc. expenditure - - - - -

EBITDA margin (%) 15.4 14.8 14.4 14.8 16.3 Total assets 6,934 7,130 9,074 10,782 12,488

Adj PAT Margin (%) 5.1 7.7 7.7 7.6 8.6

RoE (%) 29.6 43.3 39.4 36.4 40.2 Cash flow

RoCE (%) 33.2 38.4 39.0 36.2 41.2 (Rs mn) FY09 FY10 FY11E FY12E FY13E

RoIC (%) 31.2 40.0 37.7 35.1 38.9 Pre-tax profit 1,339 2,304 2,768 3,173 4,314

Total tax paid (367) (693) (914) (1,047) (1,424)

Valuations Depreciation 525 529 563 781 953

Price-earnings (x) 7.6 9.3 13.2 11.5 8.4 Working capital changes 839 (1,251) 686 213 1,064

Price-book (x) 2.1 3.5 4.6 3.8 3.1 Net cash from operations 2,336 889 3,103 3,121 4,908

EV/EBITDA (x) 3.5 5.6 7.9 6.8 5.1 Cash from investments

EV/Sales (x) 0.5 0.8 1.1 1.0 0.8 Capital expenditure (1,525) 39 (2,850) (2,600) (3,100)

Dividend payout ratio (%) 39.3 34.2 32.7 40.9 38.0 Investments and others 40 (197) (199) (223) (249)

Dividend yield (%) 5.5 3.7 2.5 3.6 4.5 Net cash from investments (1,486) (158) (3,049) (2,823) (3,349)

Cash from financing

B/S ratios Equity raised/(repaid) (268) - - - -

Inventory days 49 68 62 58 43 Debt raised/(repaid) 74 (959) 800 600 100

Creditors days 98 87 95 95 95 Dividend (incl. tax) (357) (534) (607) (870) (1,098)

Debtor days 25 24 24 24 24 Others (incl extraordinaries) 109 78 (103) (148) (187)

Working capital days (7) (2) 2 (4) (10) Net cash from financing (441) (1,414) 90 (418) (1,185)

Gross asset turnover (x) 1.9 2.2 2.2 2.0 2.0 Change in cash position 410 (683) 144 (120) 374

Net asset turnover (x) 3.3 3.6 3.6 3.2 3.2 C losing cash 870 187 331 211 584

Sales/operating assets (x) 2.8 3.3 3.5 3.1 3.1

Current ratio (x) 1.0 1.2 1.0 1.0 0.9 Quarterly financials

Debt-equity (x) 1.1 0.6 0.6 0.6 0.5 (Rs mn) Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11

Net debt/equity (x) 0.8 0.5 0.5 0.5 0.4 Net Sales 5,120 6,712 4,734 5,852 6,625

Interest coverage 3.0 7.2 8.7 8.0 9.8 Change (q-o-q) 5% 31% -29% 24% 13%

EBITDA 739 1,008 814 816 837

Per share Change (q-o-q) 2% 36% -19% 0% 3%

FY09 FY10 FY11E FY12E FY13E EBITDA margin 14.4% 15.0% 17.2% 13.9% 12.6%

Adj EPS (Rs) 6.7 12.2 14.6 16.7 22.8 PAT 371 520 403 412 395

CEPS 10.8 16.4 19.0 22.9 30.3 Adj PAT 371 520 371 412 395

Book value 23.9 32.6 41.6 50.3 63.0 Change (q-o-q) 3% 40% -29% 11% -4%

Dividend (Rs) 2.8 4.2 4.8 6.8 8.6 Adj PAT margin 7.2% 7.7% 7.8% 7.0% 6.0%

Actual o/s shares (mn) 127.0 127.0 127.0 127.0 127.0 Adj EPS 2.9 4.1 2.9 3.2 3.1



Focus Charts

RoE and RoCE to remain strong Revenue and growth trend


Share Price Movement EBITDA and EBITDA margin trend

-indexed to 100


PAT and PAT margins to improve Shareholding pattern over the quarters


29.6

43.3

39.4

36.4 40.2

33.2

38.4 39.0

36.2

41.2

25

27

29

31

33

35

37

39

41

43

45


(%)

ROE ROCE

16,587 20,155 24,000 27,933 33,543

26.4%

21.5%

19.1%

16.4%

20.1%

0%

5%

10%

15%

20%

25%

30%

0

5,000

10,000

15,000

20,000

25,000

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40,000


(Rs mn)

Revenues growth % (RHS)

0

100

200

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600

Mar-07

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Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Supreme NIFTY

2,547 2,974 3,447 4,121 5,459

15.4%

14.8%

14.4%

14.8%

16.3%

13%

14%

14%

15%

15%

16%

16%

17%

0

1,000

2,000

3,000

4,000

5,000

6,000


(Rs mn)

EBITDA EBITDA Margin (RHS)

852

1,5551,855

2,126

2,890

5.1%

7.7% 7.7% 7.6%

8.6%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0

500

1,000

1,500

2,000

2,500

3,000

3,500


(Rs mn)

PAT PAT Margin (RHS)

49.6% 49.6% 49.6% 49.6%

3.9% 4.1% 4.2% 6.8%0.4% 0.5% 1.1%1.3%

46.0% 45.8% 45.1% 42.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jun-10 Sep-10 Dec-10 Mar-11

Promoter FII DII Others


CRISIL Research Team

Senior Director

Mukesh Agarwal +91 (22) 3342 3035 [email protected]

Analytical Contacts Tarun Bhatia Director, Capital Markets +91 (22) 3342 3226 [email protected]

Prasad Koparkar Head, Industry & Customised Research +91 (22) 3342 3137 [email protected]

Chetan Majithia Head, Equities +91 (22) 3342 4148 [email protected]

Sudhir Nair Head, Equities +91 (22) 3342 3526 [email protected]

Jiju Vidyadharan Head, Funds & Fixed Income Research +91 (22) 3342 8091 [email protected]

Ajay D'Souza Head, Industry Research +91 (22) 3342 3567 [email protected]

Ajay Srinivasan Head, Industry Research +91 (22) 3342 3530 [email protected]

Sridhar C Head, Industry Research +91 (22) 3342 3546 [email protected]

Manoj Mohta Head, Customised Research +91 (22) 3342 3554 [email protected]

Business Development

Vinaya Dongre Head, Industry & Customised Research +91 (22) 33428025 [email protected]

Ashish Sethi Head, Capital Markets +91 (22) 33428023 [email protected]

CRISIL’s Equity Offerings

The Equity Group at CRISIL Research provides a wide range of services including:

� Independent Equity Research

� IPO Grading

� White Labelled Research

� Valuation on companies for use of Institutional Investors, Asset Managers, Corporate

Other services by the Research group include

Funds & Fixed Income Research

� Mutual fund rankings

� Wealth Tracking and Financial Planning tools for asset managers, wealth managers and IFAs

� Valuation for all debt instruments

� Developing and maintaining debt and hybrid indices

� Consultancy and research support to retirement funds

Industry & Customized Research

� Provide comprehensive research coverage across 65 sectors

� Customised research on market sizing, demand modelling and entry strategies

� Customised research content for Information Memorandum and Offer Documents


About CRISIL Limited

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are

India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks

and leading corporations.

About CRISIL Research CRISIL Research is the country’s largest independent and integrated research house with strong domain expertise

on Indian economy, industries and capital markets. We leverage our unique research platform and capabilities to

deliver superior perspectives and insights to over 1200 domestic and global clients, through a range of research

reports, analytical tools, subscription products and customised solutions.

Head Office: CRISIL House, Central Avenue, Hiranandani Business Park, Powai, Mumbai - 400 076 Phone : 91-22-3342 3000 Web: www.crisil.com Download reports from: www.ier.co.in

Ashish Sethi – Head, Business Development

Email : [email protected] I Phone : 9920807575

To know more about CRISIL IER, please contact our team members:

Sagar Sawarkar – Senior Manager, Business Development


Regional Contacts:

Vinaya Dongre – Head, Business Development


Hyderabad Kaliprasad Ponnuru - Manager, Business Development


Kolkata / Delhi Priyanka Agarwal - Manager, Business Development


Ahmedabad / Mumbai / Pune Vishal Shah - Manager, Business Development


Bengaluru / Chennai Anand Krishnamoorthy - Manager, Business Development


CRISIL Report

Documents

Transcript of CRISIL Report