Supreme Industries Limited (SUPREMEIND) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Supreme Industries Q2 FY27 Earnings Conference Call hosted by Dam Capital Advisors Ltd. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note, this conference is being recorded. I now hand the conference over to Mr. Arsene. Thank you, and over to you, sir.

Thank you. So, good evening, and welcome, everyone, on Supreme Industry's Q227 earnings call. We have the senior management of the company who will take us to the quarter performance, post which we will open it all for questions. Thank you, and over to Mr. Taparia for his opening remarks.

Thank you, Mr. Kassim, and thank you, M.P. Taparia, Chairman and Managing Director of the Supreme Ministry. I, along with my colleague, C.P.C. Swamani, C.F.O., and C.R.J. Sabu, Vice President, Corporate Affairs and Company Secretary, welcome our participants who are participating in the discussion of the unartificial chain alone And consolidated finance results for the quarter and half year ended 30th September 2026. The exchange alone results and the consolidated results are already with you. I will give a brief on company's product operating performance and other highlights. The company sold 341,991 ton of plastic goods and achieved revenue from operation of Rs. 6,079 crore during first half year of the current year against sales of 338,224 ton and net product turnover of Rs. 5,003 crore in the corresponding half-year of previous year, Achieving volume and product value growth of about 1% and 22% respectively. The stand-alone operating profit and profit output tax for the half-year of the current year amounted to Rs. 829 crore and Rs. 487 crore as compared to Rs. 617 crore and Rs. 371 crore respectively For the corresponding period of the previous year, achieving an increase of 34% and 31% respectively. The business scenario of all the product segment of the company for the second quarter ended 30 September 2026 as compared to the corresponding quarter of the previous year as with age under. Plastic piping system, business grew by 24% in volume and 42% in value term. Packaging product segment grew by 3% in volume and 22% in value term. Industrial product segment business grew 13% in volume and 49% in value term. The consumer product segment business grew by 14% in volume and grew by 2% in value term. The overall increase to Rs. 1,476 crore during the current second quarter is compared to Rs. 1,072 crore in the corresponding quarter of previous year, achieving a growth of 38%. The operating environment stabilized in the second quarter after the unusual polymer price volatility of the first quarter. Due political development in West Asia remains a source of uncertainty, while the minimum import price or suspension grade PVC regime and withdrawal of the custom duty exemption have reduced volume. In plastic piping system, volume grew by 24% in the second quarter, bringing first-off volume growth of about 2% year-on-year. Continued restraining the business through evaluated products like pad piping system, gas piping system, electric refrigerant fitting, premium range of bar fitting, industrial valve, and silent pipe system made for body properly, and wider market reach and integration Thank you very much.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

The question is from the line of Shravan Shah from Dalat Capital.

Please go ahead.

Hi, sir. Just a couple of things to understand. So now, particularly in the plastic piping, where we are saying that and we have reduced the guidance from 15 to 17% to now 13%. But considering the muted growth in the one edge, even though to achieve this 13%, we need to do a kind of a 22% kind of a growth in the second half, which is kind of a Thank you very much.

Going at the present number to be announced again, because in the month of October, in the first 25 days, we have maintained 27% volume growth. This is low call cost from 15% to 13% is a result of the first quarter working, where we had a degrowth of around 13.5% in plastic piping system due to deep reduction in the price in the month of April, which was unprecedented.

Got it, sir. And, sir, in this quarter Q2, have we seen any kind of inventory loss? And related to that, currently, in terms of the channel level, the inventories are at a normal level. And at the same time, in terms of the, another thing is on the pricing front, have we seen the price hike in the CPVC also in the month of October?

No, PVC price has gone up, according to the CPI price has gone up, but it's gone up to a reasonable level which can be easily affordable to our customers, so we have no problem. And inventory level, we cannot say, but we think the customers are all now remaining very cautious. They are keeping inventory to a minimum level, and we are making sure that whatever order we receive, because our use capacity has so many sites, we are able to deliver most of their order within 48 hours.

Okay, and there is no inventory gain or loss in the Q2?

Inventory gain is going to be in the first half overall, first half also, but then overall inventory gain, we can tell precisely when we close the year, in the month of March next year. There will be inventory gain.

Okay, and then whatever the PVC price hike has happened till now, everything has been passed on to the system. So, why I'm asking is that because there is a significant growth for us in terms of the realization in the PVC segment particularly. For last three quarters, if I look at kind of a 7.5% kind of a every quarter QOQ, there is an increase. Obviously, the PVC prices has went up, but do we still see if the current prices stay where it is? And let's assume there is no hike. Can we see some increase in QOQ in the realization in the third quarter?

I don't follow. You have so many points. We have increased the second price. We have increased the price. We are increasing the price after a time late, but we have passed on the increased price to increase cost to our customers.

Okay, okay. And Martin, we have already said... Sorry to interrupt, sir.

Should we have a follow-up question, please rejoin the queue. The next question is from the line of Kesha from HDFC Securities. Please go ahead.

Hello, hi. Thank you for the opportunity. One thing I want to understand as you allocate the fact that October demand is healthy, but it might be due to, you know, this time Diwali is pushed by a month. Normally that possibly might be leading to higher demand in October.

Dear friend, normally October is Yassara time. Yassara time business remains very slow because most of the workers who are working in a various housing project go to their village. So I already started from 11th of October and over by 21st 12 days the business was slow. But overall considering the last year also, so I have given you the volume growth up to yesterday's sale.

Okay, I am talking about Diwali. Last year, Diwali was in October, this time it is in November, so that is going to, you know, a stronger volume growth in October.

Diwali will be having lower growth. Diwali will not be affected much growth. Diwali only the, some country only growth between Dantairashtu, Lop, Panchami, which is going to be between 6th and 13th of November, but only 13th years are affected.

I got it.

This is helpful. We can see the employee cost have increased by 25% year-on-year. Why is there a sharp increase?

Increase by normal increase by 9% and also increase in the number of people also joining the company.

Plus the new units which have been added last year second half, which were not there in the first half.

Understood. One last question from my side. We can see is when your protective segment, packaging segment margin has taken a hit in this quarter, what is the reason for the same? And earlier, you just need to give us some sense about, you know, inventory gain, a particular range. At least you can give some sense how has been the H1 inventory gain, a broader range.

There will be some inventory gain, but final correct inventory gain, we'll tell you in the month of April.

However, we anticipate that today's inventory gain in this year.

Oh, the reason why I am again asking you this question is because we see, you know, Q2 margin is still sub-13% in spite of inventory gains. So, why is the margin low in this quarter?

But here the Rombatai prices are on the higher side, so your basis becomes higher for purposes of market.

Apart from that, whenever the price is taking place, we want to help our distributors to repair their balance sheet.

So, we increase the price only for 10-12 days gain.

Understood.

Thank you so much, sir. That's it.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. Next question is from the line of Praveen from PL Capital. Please go ahead.

Yeah, hi. Thank you for the opportunity. Sir, on the packaging segment, there is a, you know, margin contraction. So, is that the elevated RM prices which has not yet passed on? What is the reason for that?

It was difficult to pass on, but the increase was too steep in the polythylene price. Both in direct linked to crude price, and the increase was very steep, and supply was not able to come from Middle East. Middle East is a big supply of polythylene in the country, and many plants in Greece remain close. The segment from Middle East to India or anywhere in the world will become very difficult. And that's why the margin in packaging business has gone down. Because in fact, packaging film, we were not able to get the price increase so easily acceptable by the industry user. So, it was not possible to increase the price immediately properly. It's not a business, but we should reduce our margin.

Okay. And second thing, sir, you also explained that helped the distributor in the elevated RM prices. Can you quantify that and elaborate more on that, which affected your gross margin?

What do you think I can quantify when the price took place to increase the price, to increase the effect in the market after 10 to 15 days?

Okay. Thank you.

Thank you. Next question is from the line of Sneha from Nuwama. Please go ahead.

Hi, good evening, sir, and thanks a lot for the opportunity. I just want to, you know, deep dive more on the margins front while, you know, your volume guidance is understood. Your margins have been missing estimate this particular quarter as well as last quarter. What is the first reason for margin miss? We understand that product mix-wise, it should not have deteriorated because Agri was barely missing. So what is the reason of margins falling on a quarter-on-quarter basis? And what would lead to improvement?

We've still given the margin guidance for the full year at 14 to 14.5%. We are very comfortable with it at 14 to 14.5%. We'll get a very good return on our investment.

Understood. But if I exclude the inventory gains in the first quarter, margins would have been even more lower. So could we understand the reason for the margin in this particular quarter? How much price increases happened in PVC and let's say how much did you pass on?

We are increasing the price after 10 to 15 days, Jeff, to help my distributors repair their balance sheet. Increase in operating margin between 14% to 14.5% for the full year.

Understood. And then, sir, CPVC, how much of the price increases have already happened on the ground?

CPVC asks what to increase at second place. We have announced some increase we have announced from tomorrow.

So, from tomorrow, you are taking price hike in the system is what you are alluding.

It will inform the customer some 3%, 5%, 7% product to product. We are announcing increase in price from tomorrow.

Got that. Thanks, sir, and all the best.

Thank you. Next question is from the line of Anu from Anandrati Shares and Stock Brokers. Please go ahead.

Yeah, hi, sir.

Sir, what would be your guidance for the pipe, volume growth, and EBIT margin for H2FY27?

We have given the margin worth of 13% of the piping business, and if the piping business has to grow at 14 and 14.5%, otherwise we can't achieve the company margin.

So, pipe margin has to be 14, 14.5% or maybe slightly better.

Okay. And so, what would be the expected KPIX for FY27 in terms of cash outflow?

A reminder to all the participants, you may press star and 1 to ask a question. Next question is from the line of Ritesh Shah from Investec. Please go ahead.

Hi, sir. Thanks for the opportunity. Sir, my question is on PVC piping volume growth. That is very encouraging. I just want you to understand where this growth is coming from.

They are coming mostly from housing, because this is our agriculture demand, period.

July, September, January season. Sir, any other avenues besides housing which is contributing to the volume growth?

Sorry?

Sir, any other avenues besides housing which is helping us on the volume growth on the piping side?

Majority, second quarter was housing, otherwise for the full year, housing, agriculture.

Sir, do you think there are any tailwinds with respect to Null Sejal orders coming through in a few states?

Which one? Null Sejal? Null Sejal, if you understand the structure of Null Sejal business, Null Sejal business can come only from that state, which is also spending certain percentage of money, Then only they are entitled to get contribution from the centre. So, the national business is becoming very difficult now for many states to... Even if they require, they cannot start because if they don't spend money, there will be no money coming from the centre. So, the national business has fell in the last two years, and this year, as on today, I can say it is going to be much lower than whatever they budgeted. The centre budget is more than two lakhs. But when the state government is not making funds, the central government will not have money coming. So we are not very optimistic about any big volume business this year also. But the business is coming from the irrigation system, the business is coming from the serious system. But it is not a big business in our company because many people are playing with the quality, we don't play with the quality.

Sir, would it be possible for you to give some color on OPVC, doors and windows, and gas fittings business as well?

So, my three things together, I can say OPVC business is picking up now. We anticipate good growth for the full year in OPVC. We are introducing several new varieties also in OPVC, going forward in the remaining six months. And our window, we have started only ready-made window, and every month our business window is increasing. Every month we are servicing with distributorship in the major cities, and we are quite optimistic the growth of. We are also very encouraged in our bath fitting business. We have introduced a new range of Moho bath fitting, which apart from offline, we started selling online, and we started getting order online also of our Moho bath fitting.

And, sir, gas fittings?

Gas fittings were very accepted, and now we are in a position to supply gas from five locations. We get advantage of gas pipe coming in the coil. The freight content is very high. So, we are the only company in the country which can supply from five locations.

East, West, South, North, and Northeast, all the five locations.

Sure, sir. Thank you so much for the answers.

Thank you.

Thank you. Next question is from the line of R. Ghaavri, an individual investor. Please go ahead.

Hello.

Yeah, yeah, Pritchett.

Yeah, yeah. Hello, sir. Sir, can you repeat in the beginning you gave some revenue guidance for FY27. I could not catch that number.

Can you please repeat that number, revenue growth guidance.

FY17, we expect our business to grow between 13,500 crore to 14,000 crore. Our operating margin is between 14% to 14.5%.

And this is overall total consolidated revenue growth, right? Okay, thank you very much.

Thank you. Next question is on the line of Sneha from Nuwama. Please go ahead.

Thank you, sir, and thanks for the follow-up opportunity. I just wanted to understand that otherwise, business has increased from roughly about 20-odd crores to about 80-odd crores. So, is that the Mohi division that's getting factored in, or is that the Windows Doors business that you've got into that's getting factored in here?

No, Mohi part is part of plastic piping system. Okay. Which is for me part of others as of now. Secondly, some other things. In an incidental business of the raw material reading, we have some normally sales.

Right. So, that gets into the others part is what you're saying. Understood. Thanks for the clarity, sir.

That was about it.

Thank you.

Thank you. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. Next question is from the line of stages from Citigroup. Please go ahead.

Thanks, sir. I just missed the volume growth for the month of October so far that you mentioned at the start of the call. Can you repeat it?

Up to yesterday, for this month, the growth is 23% in plastic pipe system.

Okay, okay, so 25 days of October, 23% is the wire-wired growth in plastic pipe. For raw materials, how many days of inventory do you typically carry and any change in that over the recent period or currently?

We are keeping adequate raw material requirement because there are some imported raw material. We are keeping more inventory also because there is so many uncertainty about when the sheep will live and when the sheep will arrive. So we are keeping adequate inventory so that we don't deprive our customers that we can't make supply because no raw material is available. We have adequate raw materials of so many grade of materials we are using, and many of them are from imports, and we are keeping adequate raw materials as per the supply situation, so that we are responsible to supply to all our customers throughout the country.

Understood. And lastly, if I just calculate the realizations in the plastic piping segment in terms of per kg, and if I just look at it on a VOI basis for the first half, The increase that I see is slightly higher than the increase in the PVC price, domestic prices. So, is it just a function of mix or any policy?

Only using PVC, now we are making silent pipe, which is the most expensive raw material, which is made from polypropylene, special formula of material. We are also supplying for plumbing system, part pipe system, which is very expensive raw material, made outside the country. Polypropylene, which we are using for silent pipe, also made outside the country, where the cost of raw material is basically also quite high, and the rupee going down also increases the cost. So, only PVC basically will not be able to arrive at every cost of raw material at least. And CPVC are also very expensive. All materials used in the piping system are quite expensive materials.

Right, understood. And the share of these newer products and CPVC, how much would it have increased on a yoy basis in any sense?

Every segment, we are going to sign in case only.

Every segment, business is growing.

Okay. Thanks. Thanks.

Next question is from the line of Bhavin Rupani from Investec. Please go ahead.

Hi. Thank you, sir, for the opportunity. I have just one question on Nalse Jal. Sir, what we understand is central government has released about 7,700 crores for post-CAG audits in August 26. Do you think as funds start to get released by central government, we could see incremental volume growth coming in from FY28 onwards?

To again take the order. To our mind, we are not going to spend big way from central government also, this year.

As it happened last two years, same thing may happen this year also. Got it, sir. Thank you so much.

Thank you. Next question is from the line of Rahul Agarwal from Ikigai Asset. Please go ahead.

Yeah, Lidya.

Yeah, hi, sir. Good evening. Sir, three questions. Firstly, what was the CPVC volume growth for first half?

30.5%.

Okay. And sir, for the packaging and the industrial segment, what is the volume growth guidance for full year?

In just a product segment, we know volume guidance because it depends on the customer what item they want to order. It may be less raw material or volume by less raw material but quite expensive raw material. So, very difficult to give any volume segment on the industrial customer. We are doing custom molding only.

Right. But it's fair to say that this business will start recovering in terms of sales volume growth in second half. Is that directionally correct?

In India product segment business grew by 13% volume. It was quite comfortable. Only packaging product segment business had a very small growth. Because the price had gone too high, demand was not matching the capacity. The production price had gone too high. The country has shown 10% degrowth this year. Okay.

Okay. So, would you expect recovery in second half or it will remain weaker in second half and then maybe?

As on today, crude price remains quite high.

Got it, sir.

We can't say.

And, sir, got it. And for consumer product business or furniture, what is the issue exactly? Why is this degrowing so much?

Price has gone too high. Because the procedure was not available also because government has put restriction on the local producer. We have a lot of materials that divert quite a good capacity to make LPG. From propylene, use 50% LPG and 50% only to make raw materials. The local supply also was affected by polypropylene. And all furniture are also made from polypropylene and raw materials.

Got it, sir. Got it. Thank you so much, sir, for answering my question.

Thank you. A reminder to all the participants, anyone who wishes to ask a question may press Next question is from the line of Sushant Soni from Drishya Capital. Please go ahead.

Okay. Thank you. Hi sir. Thanks for taking my question. I just have one question on the industry growth rate with respect to PEC. Is there any insight that you can provide on that?

Industry growth. Industry growth. Industry growth is the number one we've got from the raw material producer is minus 10%.

This year, one inch?

This year, first half, A&P was a rumble producer, she had 10% regrowth, but they also told us the correct number they cannot know because what is the inventory assessment among all the distributors and all the retailers, they cannot capture the number. The basis is what your imports come in the country and what your supply, their supply in the country, they're shown that their number is that they get 10% degrowth in first half.

What is that? This is very helpful. So, basically, we are gaining market share at the expense of the unorganized sector.

Our market is growing, so it means that our market share has grown this year compared to the last year.

Thank you so much. Thank you.

Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. Next question is from the line of Akasha from UTI MS. Please go ahead.

Yeah. Hi, sir. Thank you for the opportunity. Sir, just wanted to check how much would be employee cost for the full year. I mean, in the first quarter, it is up 25% and absolute number is 168 crore. So, how much would be the employee cost for full year?

First half, it is 30 crore. Yes, compared to 500. New greenfield is coming this year. So, our first half number is the benchmark for the second half also. Except the commission to directors, which is based on the profits of the company.

Okay. Understood. Understood.

Right. Right. Sure. Sure, sir. Okay. Thank you.

Thank you. Anyone who wishes to ask a question may press star and 1 on their touch-to-one telephone. As there are no further questions, I now hand the concerns over to the management for closing comments.

We are very thankful for all the intelligent questions raised by our so many investors. We thank them very much.

Thank you, sir. On behalf of Dam Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

I appreciate it. Thank you very much.