SHARES of plastic products maker, Supreme Industries, fell close to 10% intra-day after the company reported a 13% drop in profit in the June quarter. The scrip, which had risen to a high of Rs 619, slipped to a low of Rs 569 only to recover marginally and close at Rs 579.3 — 1.7% below its previous close. However, investors need not panic as the operational performance of the company continues to improve and at the same time has increased its dividends.
The June 2010 quarter results appear weak in comparison to the year-ago numbers, mainly due to the high base effect. In the June 2009 quarter, the company had nearly tripled profits to Rs 60 crore because of substantial inventory gains.
The company didn’t report any sales from its commercial complex at Andheri, valued at around Rs 450 crore. Out of the total area which can be sold, aggregating 2.5 lakh sq. ft., the company plans to keep 20,000 sq. ft. for itself and to sell the remaining portion by December 2010. So far, it has sold one office block and negotiations
for a few more are at an advanced stage.
In its traditional business of plastic products, the company reported a 12% volume growth in the yearended June 2010. The growth couldn’t be higher because of the delay in its Rs 130-crore capex programme, of which Rs 49 crore will be spent by October 2010. Supreme Industries has already planned the next phase of capex investing at Rs 180 crore in FY11, to enhance capacities across all its product lines and increase the share of value-added products. The company is aiming for a 20% volume growth in its sales for FY11.
The sale proceeds from the commercial complex will not only enable the company to fund this ambitious expansion programme but also to reduce its debt burden. The company curtailed its interest cost by 39% to Rs 33 crore by reducing debt as well as bringing down the average cost of borrowing. This could go down even further, if the property sale plans proceed as envisaged.
The company is, however, rewarding its shareholders with handsome dividends and not hoarding cash for the sake of expansion plans. It raised its dividend for FY10 to Rs 18 per share from Rs 12 last year. At the same time, it is planning to sub-divide its shares of Rs 10 face value into shares of Rs 2 face value. Considering the average daily volumes of 14,000 shares in the last one month, this will greatly increase liquidity and could attract more institutional investors. Institutional investors now hold less than 1% of the company’s paid-up equity.
Supreme Industries is now valued 10.2 times its net profit for the year ended June 2010, which can be considered fair for its existing business. However, considering the revenues from the property business, its expansion plans and improving dividends, the scrip remains attractive for retail shareholders.
The June 2010 quarter results appear weak in comparison to the year-ago numbers, mainly due to the high base effect. In the June 2009 quarter, the company had nearly tripled profits to Rs 60 crore because of substantial inventory gains.
The company didn’t report any sales from its commercial complex at Andheri, valued at around Rs 450 crore. Out of the total area which can be sold, aggregating 2.5 lakh sq. ft., the company plans to keep 20,000 sq. ft. for itself and to sell the remaining portion by December 2010. So far, it has sold one office block and negotiations
for a few more are at an advanced stage.
In its traditional business of plastic products, the company reported a 12% volume growth in the yearended June 2010. The growth couldn’t be higher because of the delay in its Rs 130-crore capex programme, of which Rs 49 crore will be spent by October 2010. Supreme Industries has already planned the next phase of capex investing at Rs 180 crore in FY11, to enhance capacities across all its product lines and increase the share of value-added products. The company is aiming for a 20% volume growth in its sales for FY11.
The sale proceeds from the commercial complex will not only enable the company to fund this ambitious expansion programme but also to reduce its debt burden. The company curtailed its interest cost by 39% to Rs 33 crore by reducing debt as well as bringing down the average cost of borrowing. This could go down even further, if the property sale plans proceed as envisaged.
The company is, however, rewarding its shareholders with handsome dividends and not hoarding cash for the sake of expansion plans. It raised its dividend for FY10 to Rs 18 per share from Rs 12 last year. At the same time, it is planning to sub-divide its shares of Rs 10 face value into shares of Rs 2 face value. Considering the average daily volumes of 14,000 shares in the last one month, this will greatly increase liquidity and could attract more institutional investors. Institutional investors now hold less than 1% of the company’s paid-up equity.
Supreme Industries is now valued 10.2 times its net profit for the year ended June 2010, which can be considered fair for its existing business. However, considering the revenues from the property business, its expansion plans and improving dividends, the scrip remains attractive for retail shareholders.
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