Growth revival in H2 key for Supreme Industries after weak Q2 show

Margins fell 160 bps in Q2 FY26 amid soft realisations, but analysts expect demand recovery in housing and agriculture to lift Supreme Industries' H2 performance

A weak operating performance in the September quarter and muted near-term outlook led to a 4 per cent fall in the stock price of the country’s largest plastic pipe maker, Supreme Industries. The stock was the biggest loser on the BSE 200 in trade. It is down about 10 per cent in the last year and has underperformed the Sensex and the Nifty in this period. 

For Q2, the company consolidated revenues rose 5 per cent Y-o-Y. This was largely led by volumes which went up 12 per cent. However, realisations declined by 5 per cent given the falling polymer prices. The growth was led by the plastic pipe segment which saw a volume growth of 17.2 per cent on a low base and value growth of 11.4 per cent. 

The company’s operating profit margins declined by 160 basis points Y-o-Y to 12.4 per cent and was below estimates. The margins were hit by fall in raw polymer prices leading to muted realisations. 

The company pointed out that plastic piping business growth for agricultural applications was adversely impacted by the early arrival of monsoons. Prolonged rainfall further weighed down on demand, leading to a decline in plastic piping volumes for the agriculture segment. 

Project demand both from the Centre and the state governments was also subdued which hit overall performance. The company, however, expects the piping segment to see a pick up in the second half on the back of strong demand from the plumbing and agricultural segments. 

Given its estimates of a recovery in the second half, the company has retained its full year (FY26) guidance of 15-17 per cent volume growth for the plastic piping business. It has also maintained overall volume growth (across segments) in FY26 at 

12-14 per cent Y-o-Y led by improving demand outlook for the housing/plumbing and agriculture segment, stable prices due to implementation of anti dumping duty and the addition of acquired capacity at Wavin. 

It continues to focus on value added products which rose 18 per cent Y-o-Y and is eyeing higher exports which currently accounts for under 3 per cent of sales. 

Motilal Oswal Research has a buy rating on the stock as it expects growth momentum to pick up in H2FY26. This is on the back of stable polyvinyl chloride prices and demand growth in housing and agriculture. 

Analysts led by Meet Jain of the brokerage expect the company to clock a 12 per cent growth in revenue and a 20 per cent growth in operating and net profit over FY25-28.  This is on the back of a FY26 guidance of 12-14 per cent volume growth and operating profit margin of 14.5-15 per cent supported by capacity additions, improved utilisation, a higher value added product mix and no inventory losses. 

ICICI Securities has, however, cut their FY26 and FY27 net profit by 11.7 per cent and 1.3 per cent respectively and expect the company’s near-term profitability to remain tepid due to weak demand and increased competition. Arun Baid and Nikunj Shah of the brokerage have maintained their hold rating and believe valuations don’t offer much upside. 

While Antique Stock Broking has revised its earnings downwards for FY26 and FY27 by 6-7 per cent considering lower margin and higher depreciation led by the Wavin acquisition, it continues to maintain a buy rating. 

Elara Securities has upgraded the stock to an accumulate rating given the 7 per cent correction in the stock price in the last three months. 

The brokerage has cut its earnings estimates for FY26 and FY27 by 11.5 per cent and 8.8 per cent respectively to factor in lower revenues and profitability.