The Supreme Industries Ltd

Initiating coverage

Enhancing investment decisions

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

5/5 4/5 3/5 2/5 1/5

Assessment
Excellent fundamentals Superior fundamentals Good fundamentals Moderate fundamentals Poor fundamentals

CRISIL Valuation Grade

5/5 4/5 3/5 2/5 1/5

Assessment
Strong upside (>25% from CMP) Upside (10-25% from CMP) Align (+-10% from CMP) Downside (negative 10-25% from CMP) 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.

CRISIL Limited. All Rights Reserved.

The

Polaris Software Limited Business momentum remains intact The Supreme Industries Ltd
Maintaining its supreme-acy in plastics
Fundamental Grade Valuation Grade Industry 4/5 (Strong fundamentals) (Superior fundamentals) 5/5 strong upside) 4/5 (CMP has upside) Information technology Chemicals

July 14, 2011

Fair Value Rs 239 CMP Rs 192

CFV MATRIX
Excellent Fundamentals

The Supreme Industries Ltd (Supreme) is Indias 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 Supremes key strengths One of Supremes 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.

Fundamental Grade

5 4 3 2 1

Poor Fundamentals

Valuation Grade
Strong Downside Strong Upside

KEY STOCK STATISTICS

NIFTY/SENSEX NSE/BSE ticker Face value (Rs per share) Shares outstanding (mn) Market cap (Rs mn)/(US$ mn) Enterprise value (Rs mn)/(US$ mn) 52-week range (Rs) (H/L) Beta Free float (%) Avg daily volumes (30-days) Avg daily value (30-days) (Rs mn) 5585/18554 SUPREMEIND 2 127.0 24,402/547 26,506/594 192/136 0.5 50.4% 110,543 19.8

SHAREHOLDING PATTERN
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Jun-10 Promoter Sep-10 FII Dec-10 DII Mar-11 Others
49.6% 49.6% 49.6% 49.6% 0.4% 3.9% 0.5% 4.1% 1.1% 4.2% 1.3% 6.8% 46.0% 45.8% 45.1% 42.3%

KEY FORECAST
(Rs mn) Operating income EBITDA Adj Net income Adj EPS-Rs EPS growth (%) PE (x) P/BV (x) RoCE (%) RoE (%) EV/EBITDA (x) FY09 16,587 2,547 852 6.7 76.2 7.6 2.1 33.2 29.6 3.5 FY10 20,155 2,974 1,555 12.2 82.6 9.3 3.5 38.4 43.3 5.6 FY11E 24,000 3,447 1,855 14.6 19.3 13.2 4.6 39.0 39.4 7.9 FY12E 27,933 4,121 2,126 16.7 14.6 11.5 3.8 36.2 36.4 6.8 FY13E 33,543 5,459 2,890 22.8 36.0 8.4 3.1 41.2 40.2 5.1

PERFORMANCE VIS--VIS MARKET

Returns 1-m SUPREME NIFTY 7% 2% 3-m 24% -6% 6-m 31% -3% 12-m 67% 3%

ANALYTICAL CONTACT
Sudhir Nair (Head) Niyati Dave Bhaskar Bukrediwala Client servicing desk +91 22 3342 3561 clientservicing@crisil.com snair@crisil.com ndave@crisil.com bsbukrediwala@crisil.com

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 CRISIL Limited. All Rights Reserved.

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The Supreme Industries Ltd

Table 1: Supreme: Business environment
Product / Segment Revenue contribution (FY10)* Revenue contribution (FY13E)* 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 in protective packaging; market leader in cross laminated films Sales growth (FY08-FY11E 3-yr CAGR) Sales forecast (FY11E-FY13E 2-yr CAGR) 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 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 Key risks Entry of new players in plastic pipes segment Raw material price fluctuations Increasing competition in some segments, necessitating entry into new categories Raw material price fluctuations *Balance constitutes Others which includes income from trading of raw materials and real estate project Source: Company, CRISIL Equities Competition Raw material price fluctuations Client-specific demand and off take risk since company has dedicated plants for certain clients Raw material price fluctuations 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% 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 15.1% 16.3% 21.4% 15.5% 28.8% 19.7% 20.3% 20.7% Second largest player with 18% market share in material handling products; preferred supplier to OEMs across various products 15% market share 40.3% 22.2% 11.4% 18.0% 39.7% 22.8% 10.5% 18.9% Plastic pipes and fittings Packaging products Consumer products Industrial products

6-7 large players and other unorganised players

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The Supreme Industries Ltd

Grading Rationale
Reigning supreme products industry over the Indian plastic

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

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

products. Plastic pipes and fittings is Supremes 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 Supremes 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)

Industrial products 19%

Others (including commercial real estate) 8%

Plastic pipes and fittings 40%

Packaging products 23%

Consumer products 10%

Source: Company, CRISIL Equities

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.

Low per capita polymer consumption, indicates plenty of room for plastic consumption to grow

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The Supreme Industries Ltd

Table 2: International comparison of polymer consumption
Per Capita Polymer consumption US China Brazil India Source Industry sources, CRISIL Equities kgs 71.5 30.7 22.7 5.7

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.

Plastic is fast replacing many conventional materials

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 has a diverse piping products portfolio

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.

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The Supreme Industries Ltd

Fig 2: Supremes pipe portfolio (FY11E)
Fittings 11.0%

Fig 3: Supreme - Pipes by end-use (FY11E)

CPRC 6.9%

Agriculture and infrastructure 41.2%

Housing 29.4%

CPVC 9.8%

PVC 72.3%

Sewerage &rainwater drainage 29.4%

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.

Demand for piping products from housing and irrigation segments to be robust

Fig 4: Indian pipe market (4.7 mn tonnes)

Ductile Iron 18.4% Cement 12.3%

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

CPVC 1.0%

Polypropylene 1.0% Steel (ERW) 7.4% Polyehylene 12.0% PVC 86.0%

Plastic 34.8%

Steel (SAW) 27.2%

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 Nilkamals ~30%). The company manufactures and sells commodity

Supreme is the second largest player in moulded plastic furniture segment

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The Supreme Industries Ltd

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 outlets. mostly through retail

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)

Protective Packaging Products 31%

Cross laminated Films 54%

Performance films 13%

Others 2%

Source: Company, CRISIL Equities

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 CRISIL Limited. All Rights Reserved.

Supreme is sole manufacturer and supplier of cross laminated films in India and South Asia

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The Supreme Industries Ltd

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 competitive industry

leading

player

in

highly

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

Estimated Market Products EPE Foam Air Bubble Film Cap Cell Size (Rs mn) 2200 1600 2100 Supreme's Share in FY10 (%) 39% 33% 33%

Source: Company, CRISIL Equities

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

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The Supreme Industries Ltd

Table 4: Industrial products snapshot
Product categories Moulded parts like dashboards and other parts for automobile interiors and exteriors 44 % of FY11E revenues Clients Mahindra and Mahindra Ltd, Maruti Suzuki India Ltd, Tata Motors Ltd Comments Is the major supplier of plastic parts for Tata Motors Prima at Jamshedpur Largest player in the consumer durables segment, is the major supplier to Samsung (India) for Hitachi India Pvt. Ltd, Samsung plastic requirements ranging Plastic body for consumer durables 22 India Electronics Ltd, Tata Chemicals Ltd, Whirlpool India Ltd from television sets to computers, is the sole supplier for complete plastic requirement for washing machine model Radiance for Whirlpool India Ltd Coca Cola India, Hindustan 34 Unilever Ltd, Pepsico India Reliance Retail

Material handling products like pallets, crates and bins. Source Company, CRISIL Equities

Largest supplier of bottle crates to the soft drinks industry

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

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The Supreme Industries Ltd

Product diversification and innovation give Supreme the edge
One of Supremes key strengths is the companys 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

Supreme has been the first mover in many new product segments, which helps it to gain the requisite market share

temperature and fire resistant foam in protective packaging SWR drainage systems, Aqua Gold high pressure plumbing system, IndoGreen 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.

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The Supreme Industries Ltd

Fig 7: Supreme has relatively lower revenue growth...

(Rs mn) 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 20,155 20% 12% 10,950 10,003 32,816 6,078 36% 29% 41% 63% 70% 60% 50% 40% 30% 20% 10 10% 0% 5 0 Supreme Industries Finolex Industries Nilkamal Time Sintex Technoplast Industries Kemrock Industries* 14,527 14.8 20 15 25.2 21.9 12.2 19.5 15.3

Fig 8 : ...and lower EBITDA margins

(%)
30 25

Supreme Industries

Finolex Industries

Nilkamal

Time Technoplast

Sintex Industries

Revenue (FY10)

3-yrs revenue growth (FY07-10)

Kemrock Industries*

EBITDA margin (FY10)

Source: Industry sources, CRISIL Equities

Source: Industry sources, CRISIL Equities

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

RoCE (%) 45 40 35 30 25 20 15 10 5 0 10 15 20 25 30 35 40 45 RoE (%)

Fig 10: ...due to excellent working capital management

Kemrock Industries* 229

Sintex Industries

97

Time Technoplast

107

Nilkamal

81

Finolex Industries

14

Supreme Industries

22

Supreme Industries Nilkamal Sintex Industries

Finolex Industries Time Technoplast Kemrock Industries*

50

100

150

200

250

Working capital days (FY10)

Source: Industry sources, CRISIL Equities *Kemrock Industries data is for 15 months.

Source: Industry sources, CRISIL Equities

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.

Competition is expected to intensify both from organised and unorganised players

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The Supreme Industries Ltd

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 companys 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 companys capex requirements.

Sales from the real estate project will take some time to complete

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 Petrochems 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 Petrochems PAT to grow at a CAGR of 12% in FY11-13, consequently supporting Supremes profits.

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The Supreme Industries Ltd

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.

Raw material price and competition are key monitorables

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 companys 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 companys 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.

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The Supreme Industries Ltd

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.

Revenues likely to grow at a three-year CAGR of 19% to Rs 33.5 bn in FY13

Fig 11: Expect strong growth in revenues

(Rs mn) 40,000 35,000 21.5% 30,000 25,000 20,000 15,000 10,000 5,000 16,587 0 FY09 FY10 Revenues FY11E FY12E FY13E 20,155 24,000 27,933 33,543 0% 5% 19.1% 16.4% 20.1% 20% 15% 10% 26.4% 30% 25%

Fig 12:Revenue mix to remain unchanged in FY13

Others 8% Industrial products 18%

Plastic pipes and fittings 40%

Consumer products 12% Packaging products 22%

growth % (RHS)

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 companys 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

(Rs mn) 6,000 16.3% 17% 16% 15.4% 4,000 14.8% 3,000 14.4% 15% 2,000 14% 1,000 2,547 0 FY09 FY10 EBITDA FY11E FY12E FY13E 2,974 3,447 4,121 5,459 13% 14% 14.8% 15% 16%

5,000

EBITDA Margin (RHS)

Source: Company, CRISIL Equities

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The Supreme Industries Ltd

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

(Days)

Fig 15:Inventory days also expected to decline

(Days)

45 40 35 30 25 20 15 25 10 5 0 FY07 FY08 FY09 FY10 FY11E FY12E FY13E 24 24 24 24 40 38

80 70 60 50 40 30 20 10 0 FY07 FY08 FY09 FY10 FY11E FY12E FY13E 43 68 55 49 62 58 43

Receivable days

Inventory days

Note Inventory decline is owing to realisation of proceeds from real estate project Source: Company, CRISIL Equities Source: Company, CRISIL Equities

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
Supremes 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.

Strong bottom-line growth led by higher operating profits and comfortable interest outflow

CRISIL Limited. All Rights Reserved.

CRISIL RESEARCH | 14

The Supreme Industries Ltd

Fig 16: PAT and PAT margins to improve

(Rs mn)

Fig 17: EPS to rise

(Rs mn)

3,500 3,000 2,500 2,000 1,500 1,000 1,555 500 0 FY09 FY10 PAT FY11E FY12E 852 1,855 2,126 5.1% 7.7% 7.7% 7.6%

8.6%

10% 9% 8% 7% 6% 5%

25.0

83%

90% 80%

20.0

76%

70% 60%

15.0 36% 10.0 19% 15% 5.0 6.7 0.0 FY09 FY10 EPS FY11E FY12E FY13E 12.2 14.6 16.7 22.8

50% 40% 30% 20% 10% 0%

2,890

4% 3% 2% 1% 0%

FY13E

PAT Margin (RHS)

EPS Growth (RHS)

Source: Company, CRISIL Equities

Source: Company, CRISIL Equities

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

(%) 45 43 41 39 37 35 33 31 29 27 25 FY09 FY10 ROE FY11E FY12E ROCE FY13E 29.6 33.2 38.4 39.0 36.2 39.4 36.4 40.2 43.3 41.2

Higher returns and better utilisation of existing assets is expected to maintain the RoE and RoCE

Source: Company, CRISIL Equities

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CRISIL RESEARCH | 15

The Supreme Industries Ltd

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.Taparias brother and Mr. V.K. Taparias 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.

The Taparia family has largely focussed on the business they know best - plastics

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 companys 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 managements 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. CRISIL Limited. All Rights Reserved. CRISIL RESEARCH | 16

The Supreme Industries Ltd

Corporate Governance
CRISILs 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 companys corporate governance. Overall, corporate governance at Supreme is good and is supported by good board practices and an independent board.

Corporate governance practices are good

Board composition
Supremes board comprises nine members, of whom five are independent directors, which is more than the requirement under Clause 49 of SEBIs 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 companys business and its processes and their participation in Board meetings is good.

Boards processes
The companys 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.

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CRISIL RESEARCH | 17

The Supreme Industries Ltd

Valuation Grade: 4/5
We assign a fair value of Rs 239 per share to Supreme and initiate coverage with a valuation grade of 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 firms estimated free cash flow from FY12 to FY18.

We have included capital expenditure of ~Rs 2,500 mn annually from FY1218, including maintenance capex.

We have assumed a terminal growth rate of 4% beyond the explicit forecast period until FY18.

WACC computation
FY12-16 Cost of equity Cost of debt (post tax) WACC Terminal growth rate 15.3% 8.2% 12.7% Terminal value 15.3% 8.2% 12.7% 4.00%

Sensitivity analysis to terminal WACC and terminal growth rate

Terminal growth rate Terminal WACC 2.0% 10.7% 11.7% 12.7% 13.7% 14.7% 248 219 196 177 162 3.0% 273 238 211 189 172 4.0% 307 263 229 203 183 5.0% 352 294 252 221 196 6.0% 417 337 283 243 213

The fair value implies P/E multiple 10x FY13 EPS of Rs 22.8

Source: CRISIL Equities estimates

Valuation of profits from Supreme Petrochem

We have valued Supremes 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 Supremes DCF value of Rs 229 per share, gives a fair value of Rs 239 per share.

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CRISIL RESEARCH | 18

The Supreme Industries Ltd

One-year forward P/E band

(Rs) 250

One-year forward EV/EBITDA band

(Rs mn) 30,000 25,000 20,000

200

150 15,000 100 10,000 50 5,000 0

Jul-07

Jul-08

Jul-09

Jul-10

Jul-11

Jul-07

Jul-08

Jul-09

Jul-10

Oct-07

Jan-08

Oct-08

Jan-09

Oct-09

Jan-10

Oct-10

Jan-11

Oct-07

Jan-08

Oct-08

Jan-09

Oct-09

Jan-10

Oct-10

Jan-11

Apr-07

Apr-08

Apr-09

Apr-10

Apr-11

Apr-07

Apr-08

Apr-09

Apr-10

Supreme Industries

1x

4x

7x

10x

EV

2x

4x

6x

Source: NSE, BSE, Company, CRISIL Equities

Source: NSE, BSE, Company, CRISIL Equities

P/E premium / discount to NIFTY

0% -10% -20% -30% -40% -50% -60% -70% -80%

P/E movement
(x) 14 12 10 8 6 4 2 0 -1 std dev +1 std dev

Jul-07

Jul-08

Jul-09

Jul-10

Oct-07

Jan-08

Oct-08

Jan-09

Oct-09

Jan-10

Oct-10

Jan-11

Apr-07

Apr-08

Apr-09

Apr-10

Jan-08

Jan-09

Jan-10

Jan-11

Jul-07

Jul-08

Jul-09

Jul-10

Apr-07

Oct-07

Apr-08

Oct-08

Apr-09

Oct-09

Apr-10

Oct-10

Apr-11

Jul-11

Premium/Discount to NIFTY

Median premium/discount to NIFTY

1yr Fwd PE (x)

Median PE

Source: NSE, BSE, Company, CRISIL Equities Note: PE has been adjusted for bonus, stock split and buy back

Source: NSE, BSE, Company, CRISIL Equities

Peer comparison
Company Supreme Industries Finolex Industries Nilkamal Time Technoplast Sintex Industries Kemrock Industries Median Average Note: Data is as of July 2011 Source: CRISIL Equities, Industry sources M.cap P/E RoE P/BV

(Rs mn) FY10 FY11E FY12E FY13E FY10 FY11E FY12E FY13E FY10 FY11E FY12E FY13E 21,849 9,501 3,772 14,189 45,303 8,698 14.1 6.1 6.4 15.8 12.2 21.1 14.1 15.0 11.8 14.2 8.0 13.9 9.0 na 12.8 12.2 10.3 na 5.3 9.6 8.4 na 9.6 9.3 7.6 na na 7.9 7.2 na 7.7 8.2 43.3 24.3 22.2 17.1 18.0 28.4 23.7 25.3 39.4 12.6 17.4 16.4 21.2 na 19.3 21.6 36.4 na 17.0 20.1 20.1 na 20.1 23.3 40.2 na na 20.2 19.4 na 22.1 25.9 3.5 1.4 1.3 2.5 2.1 2.6 2.5 2.8 4.1 1.7 1.3 2.1 1.7 na 1.9 2.4 3.4 na 0.9 1.8 1.5 na 1.8 2.1 2.7 na na 1.5 1.2 na 1.9 1.9

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CRISIL RESEARCH | 19

Apr-11

Jul-11

-90%

Apr-11

Jul-11

The Supreme Industries Ltd

Company Overview
The Supreme Industries Ltd is Indias 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.

Companys segment-wise expenditure plan

Division Industrial Moulded Products Plastic Piping System Cross laminated Film Protective Packaging Products Furniture Material Handling System Packaging Film

capacities

(mtpa)

and

capital
FY13E 40,000 247,500 22,500 33,000 45,000 33,000 15,500 436,500 1,595 FY14E 46,000 300,000 27,500 36,000 48,000 36,000 15,500 509,000 2,002 FY15E 50,000 360,000 27,500 40,000 54,000 42,000 21,500 595,000 1,557

FY11E 34,700 190,000 17,500 24,600 29,320 23,030 9,500 328,650 2,734

FY12E 37,500 207,500 22,500 27,500 40,000 28,000 9,500 372,500 2,046

Total Estimated Production Capacities Total Capex Budgeted (Rs mn) Source Company

Proposed expansion of manufacturing facilities

Division Industrial Moulded Products Plastic Piping System Cross Laminated Film Protective Packaging Products Furniture Composite cylinders Total Source Company No of new locations 3 2 1 4 2 1 13 Proposed locations Ahmedabad, Jamshedpur and Puduchery East Zone, South Zone Gujarat Hosur, Gujarat, West Bengal and Rajasthan Andhra and North Zone Halol (Gujarat)

Technical collaborations
Company Rasmussen polymer development Sapac packaging solution Foam Partner Sanwa Kako PE Tech Wavin Overseas Industrie Polieco MPB SRL Source Company Country Switzerland Belgium Switzerland Japan Korea Holland Italy Product Line Cross-Laminated Films Instant Packaging Solution Reticulated PU Foam 2 Stage Foam Cross Linked Foam Plastic piping system Sewerage system

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CRISIL RESEARCH | 20

The Supreme Industries Ltd

Annexure: Financials
Income statement (Rs mn) Operating income EBITDA EBITDA margin Depreciation EBIT Interest Operating PBT Other income Exceptional inc/(exp) PBT Tax provision Minority interest PAT (Reported) Less: Exceptionals Adjusted PAT Ratios FY09 Growth Operating income (%) EBITDA (%) Adj PAT (%) Adj EPS (%) Profitability EBITDA margin (%) Adj PAT Margin (%) RoE (%) RoC E (%) RoIC (%) Valuations Price-earnings (x) Price-book (x) EV/EBITDA (x) EV/Sales (x) Dividend payout ratio (%) Dividend yield (%) B/S ratios Inventory days C reditors days Debtor days Working capital days Gross asset turnover (x) Net asset turnover (x) Sales/operating assets (x) C urrent ratio (x) Debt-equity (x) Net debt/equity (x) Interest coverage Per share FY09 Adj EPS (Rs) C EPS Book value Dividend (Rs) Actual o/s shares (mn) 6.7 10.8 23.9 2.8 127.0 FY10 12.2 16.4 32.6 4.2 127.0 FY11E 14.6 19.0 41.6 4.8 127.0 FY12E 16.7 22.9 50.3 6.8 127.0 FY13E 22.8 30.3 63.0 8.6 127.0 49 98 25 (7) 1.9 3.3 2.8 1.0 1.1 0.8 3.0 68 87 24 (2) 2.2 3.6 3.3 1.2 0.6 0.5 7.2 62 95 24 2 2.2 3.6 3.5 1.0 0.6 0.5 8.7 58 95 24 (4) 2.0 3.2 3.1 1.0 0.6 0.5 8.0 43 95 24 (10) 2.0 3.2 3.1 0.9 0.5 0.4 9.8 Quarterly financials (Rs mn) Net Sales C hange (q-o-q) EBITDA C hange (q-o-q) EBITDA margin PAT Adj PAT C hange (q-o-q) Adj PAT margin Adj EPS Q3FY10 5,120 5% 739 2% 14.4% 371 371 3% 7.2% 2.9 Q4FY10 6,712 31% 1,008 36% 15.0% 520 520 40% 7.7% 4.1 Q1FY11 4,734 -29% 814 -19% 17.2% 403 371 -29% 7.8% 2.9 Q2FY11 5,852 24% 816 0% 13.9% 412 412 11% 7.0% 3.2 Q3FY11 6,625 13% 837 3% 12.6% 395 395 -4% 6.0% 3.1 7.6 2.1 3.5 0.5 39.3 5.5 9.3 3.5 5.6 0.8 34.2 3.7 13.2 4.6 7.9 1.1 32.7 2.5 11.5 3.8 6.8 1.0 40.9 3.6 8.4 3.1 5.1 0.8 38.0 4.5 15.4 5.1 29.6 33.2 31.2 14.8 7.7 43.3 38.4 40.0 14.4 7.7 39.4 39.0 37.7 14.8 7.6 36.4 36.2 35.1 16.3 8.6 40.2 41.2 38.9 Cash flow (Rs mn) Pre-tax profit Total tax paid Depreciation Working capital changes Net cash from operations Cash from investments C apital expenditure Investments and others Net cash from investments Cash from financing Equity raised/(repaid) Debt raised/(repaid) Dividend (incl. tax) Others (incl extraordinaries) Net cash from financing C hange in cash position C losing cash (268) 74 (357) 109 (441) 410 870 (959) (534) 78 (1,414) (683) 187 800 (607) (103) 90 144 331 600 (870) (148) (418) (120) 211 100 (1,098) (187) (1,185) 374 584 (1,525) 40 (1,486) 39 (197) (158) (2,850) (199) (3,049) (2,600) (223) (2,823) (3,100) (249) (3,349) FY09 1,339 (367) 525 839 2,336 FY10 2,304 (693) 529 (1,251) 889 FY11E 2,768 (914) 563 686 3,103 FY12E 3,173 (1,047) 781 213 3,121 FY13E 4,314 (1,424) 953 1,064 4,908 26.4 71.5 62.1 76.2 21.5 16.8 82.6 82.6 19.1 15.9 19.3 19.3 16.4 19.6 14.6 14.6 20.1 32.5 36.0 36.0 FY10 FY11E FY12E FY13E FY09 16,587 2,547 15.4% 525 2,021 681 1,341 (2) 57 1,396 487 908 57 852 FY10 20,155 2,974 14.8% 529 2,444 339 2,105 199 5 2,309 749 1,560 5 1,555 FY11E 24,000 3,447 14.4% 563 2,884 330 2,555 214 2,768 914 1,855 1,855 FY12E 27,933 4,121 14.8% 781 3,339 415 2,924 249 3,173 1,047 2,126 2,126 FY13E 33,543 5,459 16.3% 953 4,506 458 4,048 266 4,314 1,424 2,890 2,890 Balance Sheet (Rs mn) Liabilities Equity share capital Reserves Minorities Net worth C onvertible debt Other debt Total debt Deferred tax liability (net) Total liabilities Assets Net fixed assets C apital WIP Total fixed assets Investments Current assets Inventory Sundry debtors Loans and advances C ash & bank balance Marketable securities Total current assets Total current liabilities Net current assets Intangibles/Misc. expenditure Total assets 1,683 1,153 535 870 4,240 4,128 112 6,934 2,906 1,310 793 187 5,197 4,517 680 7,130 3,145 1,560 960 331 5,996 5,858 138 9,074 3,448 1,816 1,117 211 6,592 6,787 (195) 10,782 3,012 2,181 1,342 584 7,119 8,005 (886) 12,488 5,431 895 6,326 496 5,626 131 5,757 693 7,814 231 8,045 892 9,532 331 9,863 1,114 11,579 431 12,010 1,364 254 2,787 3,041 3,250 3,250 643 6,934 254 3,887 4,141 2,291 2,291 698 7,130 254 5,031 5,285 3,091 3,091 698 9,074 254 6,139 6,393 3,691 3,691 698 10,782 254 7,745 7,999 3,791 3,791 698 12,488 FY09 FY10 FY11E FY12E FY13E

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

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CRISIL RESEARCH | 21

The Supreme Industries Ltd

Focus Charts
RoE and RoCE to remain strong
(%) 45 43 41 39 37 35 33 31 29 27 25 FY09 FY10 ROE FY11E FY12E ROCE FY13E 29.6 10,000 5,000 16,587 0 FY09 FY10 Revenues FY11E FY12E FY13E 20,155 24,000 27,933 33,543 0% 5% 33.2 38.4 39.0 36.2 39.4 30,000 36.4 40.2 25,000 20,000 15,000 43.3 41.2

Revenue and growth trend

(Rs mn) 40,000 35,000 21.5% 19.1% 16.4% 20.1% 20% 15% 26.4% 30% 25%

10%

growth % (RHS)

Source: Company, CRISIL Equities

Source: Company, CRISIL Equities

Share Price Movement

600 500

EBITDA and EBITDA margin trend

(Rs mn) 6,000 5,000 16.3% 17% 16% 15.4% 16% 4,000 14.8% 3,000 14.4% 15% 2,000 14% 1,000 14% 2,547 2,974 FY10 EBITDA 3,447 FY11E 4,121 FY12E 5,459 13% FY09 FY13E 14.8% 15%

400 300 200 100 0

Jan-10

Nov-07

Nov-08

Jan-11

May-07

Feb-08

May-08

Feb-09

May-09

Mar-07

Jul-09

Jul-10

Apr-10

Aug-07

Aug-08

Apr-11

Oct-09

Oct-10

Jul-11

Supreme

NIFTY

EBITDA Margin (RHS)

-indexed to 100 Source: Company, CRISIL Equities Source: Company, CRISIL Equities

PAT and PAT margins to improve

(Rs mn) 3,500 3,000 2,500 2,000 1,500 1,000 1,555 500 0 FY09 FY10 PAT FY11E FY12E FY13E 852 2,126 5.1% 7.7% 7.7% 7.6% 8% 7% 6% 5% 2,890 1,855 4% 3% 2% 1% 0% 8.6% 10% 9%

Shareholding pattern over the quarters

100% 90% 80% 70% 60% 50% 40% 30% 49.6% 20% 10% 0% Jun-10 Promoter Sep-10 FII Dec-10 DII Mar-11 Others 49.6% 49.6% 49.6% 0.4% 3.9% 0.5% 4.1% 1.1% 4.2% 1.3% 6.8% 46.0% 45.8% 45.1% 42.3%

PAT Margin (RHS)

Source: Company, CRISIL Equities

Source: Company, CRISIL Equities

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CRISIL RESEARCH | 22

CRISIL Research Team

Senior Director
Mukesh Agarwal +91 (22) 3342 3035 magarwal@crisil.com

Analytical Contacts
Tarun Bhatia Prasad Koparkar Chetan Majithia Sudhir Nair Jiju Vidyadharan Ajay D'Souza Ajay Srinivasan Sridhar C Manoj Mohta Director, Capital Markets Head, Industry & Customised Research Head, Equities Head, Equities Head, Funds & Fixed Income Research Head, Industry Research Head, Industry Research Head, Industry Research Head, Customised Research +91 (22) 3342 3226 +91 (22) 3342 3137 +91 (22) 3342 4148 +91 (22) 3342 3526 +91 (22) 3342 8091 +91 (22) 3342 3567 +91 (22) 3342 3530 +91 (22) 3342 3546 +91 (22) 3342 3554 tbhatia@crisil.com pkoparkar@crisil.com chetanmajithia@crisil.com snair@crisil.com jvidyadharan@crisil.com adsouza@crisil.com ajsrinivasan@crisil.com sridharc@crisil.com mmohta@crisil.com

Business Development
Vinaya Dongre Ashish Sethi Head, Industry & Customised Research Head, Capital Markets +91 (22) 33428025 +91 (22) 33428023 vdongre@crisil.com asethi@crisil.com

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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 countrys 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.

To know more about CRISIL IER, please contact our team members:
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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 CRISIL Limited. All Rights Reserved.