Supreme Industries Ltd Q4 FY2024 Concall Summary

Key Takeaways

• Volume surged, value lagged: Plastic piping volumes jumped 33% in FY24, but revenue grew only 15% as falling PVC resin prices compressed the top line.
• Nal-se-Jal delivered a one-time boost: The government scheme added ~₹400 crore in revenue and ~25,000 tons in volume, roughly 5% of pipe turnover, but at margins management calls "very small."
• Product mix is diluting profitability: EBITDA per kg fell from ₹27 to ~₹22.8 as the mix shifted toward lower-value pipes and away from value-added products, with an inventory loss of ~₹50 crore adding to the drag.
• The next growth engine is still at zero: Supreme has entered the 200,000-ton gas pipe market but holds nil market share today; approvals and multi-location supply are works in progress.
• What to watch next quarter: Whether the promised 25% pipe volume growth materializes, the trajectory of EBITDA per kg as mix stabilizes, and any progress on gas pipe qualifications beyond the Western Zone.

Volume vs Value: The Growth Story

• Pipes drove the bus: Plastic piping volume grew 33% in FY24, well ahead of the industry's 13.79%, signaling market share gains. Revenue growth was only 15% because PVC resin prices declined through the year.
• Broad-based, not regional: Management says pipe volume growth came from all geographies and declined to provide a regional split, calling such data impossible to separate accurately.
• The 25% bet for FY25: Management targets 25% pipe volume growth in FY25, with overall company volume growth of 20% (roughly 125,000 metric tons). Non-piping segments are expected to grow about 10%, with furniture flat.
• Pricing denial: Management pushed back on dealer reports of price cuts to gain volume, insisting growth comes from adding systems, products, capacity and locations, not discounting.

Taparia: "We have no plan to go on cutting prices. We want to earn money just by investment. If you are investing money, you must get return."

Margin Mechanics: Mix, Inventory, and the Nal-se-Jal Drag

• EBITDA per kg fell sharply: From ₹27 in FY23 to ~₹22.8 in Q4 FY24. Management attributes this to a product mix shift toward pipes (lower value-added) and an inventory loss of ~₹50 crore. Adjusted for inventory effects, FY24 EBITDA per kg was ₹22.
• Nal-se-Jal is low-margin by design: The scheme contributed ~₹400 crore in revenue but at margins management repeatedly described as "small" and "very small," declining to confirm an analyst's 5%-6% estimate.
• Pipe segment margin slipped QoQ: Despite 30% volume growth and stable resin prices, pipe margins dipped slightly because the prior year included a ₹70-80 crore inventory gain. Management says it is "quite happy with the margin" ex that gain.
• Packaging margins recovered: Packaging EBIT margin improved from 7-8% last year to 18% this quarter, driven by new product ranges and growing export markets. Management hopes to maintain or improve toward last year's average on an annual basis.
• Operating leverage question went unanswered: An analyst noted other expenses rose 31% YoY and employee costs 24% YoY despite high volume growth, questioning why operating leverage gains are absent. Management did not address this in the call.

Taparia: "Small margin. Very small margin. We get satisfaction we are giving quality product to the country."

The Post-Nal-se-Jal Pipeline: Gas and New Systems

• Nal-se-Jal has a shelf life: Management believes the scheme "will be over in the next two years," making the search for the next volume driver urgent.
• Gas pipe is the nominated successor: Supreme entered the gas pipe business this year and holds zero market share in a 200,000-ton annual market. The product is currently qualified only in the Western Zone; qualifications for supply from Gadegaon, the eastern zone, and Kharagpur are underway, with capacity at the latter two expected operational by October and November this year.
• Five new piping systems incoming: Acoustic PP Pipe System (via collaboration with Poloplast GmbH of Austria), Polyethylene Gas Piping System, PERT Piping System, PE single wall corrugated pipes, and a Rainwater Harvesting System. Management says these "will definitely add to our business... significantly over the period," but gave no timeline.
• OPVC stuck on capacity: Only one plant produces 2,500 tons/year of OPVC with no free capacity. A new plant is delayed because the Spanish equipment supplier has a full order book; no new capacity arrives this year.

Taparia: "We believe Nal-se-Jal will be over in the next two years... Gas pipe system. We make so many systems, dear friend."

Capacity, Capex, and the Investment Thesis

• ₹1,500 crore capex planned for FY25: Includes ~₹496 crore in carry-forward commitments from last year. Of the new commitments, 60-70% is brownfield and expected to fructify within the year; greenfield projects in Bihar, Andhra Pradesh, and near JNPT Port will contribute production only in FY26. All capex is funded from internal accruals.
• 100,000 tons of capacity to be added by FY25-end: The majority sits in plastic piping, taking total pipe capacity from 740,000 to 835,000 metric tons. Total company capacity is expected to reach ~1,050,000 MT. Management declined to give a quarter-wise split, saying machine receipt dates are uncertain.
• The rationale is a five-year piping opportunity: Management sees "immense opportunities available for next five years plus" in plastic piping and is concentrating investment there. Packaging, performance films, and the Protective Division will also receive investment; consumer products get only new mold designs, not capacity.
• Export infrastructure being built: A new plant near JNPT Port is planned to serve export customers at economical cost, alongside a new Protective Packaging plant at the same location.

Somani: "In plastic piping, we feel there is immense opportunities available for next five years plus. So, more and more investment is being made to this segment."

Raw Material Outlook and CPVC Pressure

• PVC prices expected range-bound: Management sees no possibility of prices rising given a slow world economy, with expanded production capacity in India and neighboring countries keeping supply ample. Prices are expected to hover around ₹50,000 plus/minus.
• The anti-dumping wildcard: A petition has been filed with the government. If no duty is imposed, prices stay at current levels. If imposed by November-December, prices may rise thereafter.
• CPVC under structural pressure: Too much capacity has entered the market. Prices may drop another ₹4-5 per kilo, but producers cannot sell below cost indefinitely and may reduce production. The CPVC market grew ~13% by volume.

Taparia: "If suppose no anti-dumping duty is imposed, then price will remain at this level. If anti-dumping duty is imposed, suppose on the worst case by November-December, then thereafter prices may go up also."

Segment Round-Up

Guidance & Commitments

Key Metrics