Prabhudas Lilladher has upgraded its recommendation for Supreme Industries to 'BUY' from 'ACCUMULATE' due to a significant decline in the stock price.

In Q2FY25, the company's volume growth was lower than expected at 0.2%. This was primarily due to a 0.7% year-on-year decrease in the plastic pipe segment and a 24.5% drop in EBIT/kg to Rs14.7, which was caused by inventory losses.

The decrease in plastic pipe realizations by 4.1% year-on-year was influenced by fluctuations in PVC resin prices and competitive pricing pressures. Supreme Industries has revised its guidance for overall volume growth to 14-15% and EBITDA margins to 14.5-15.25% for FY25. The pipe segment is expected to grow by 16-18%. The company plans to expand its existing sites and establish new plants in Patna, Malanpur, and Kathua.

Analysts project a revenue/EBITDA/PAT CAGR of 15.2%/16.5%/16.3% from FY24-27E, with a volume CAGR of 13.8% and a 50 basis points improvement in EBITDA margins. Earnings estimates for FY25/FY26/FY27E have been revised downward by 6.6%/5.2%/4.2%. The new target price is set at Rs5,752, down from Rs6,069, based on a 50x FY27E earnings multiple.