Supreme Petrochem Ltd Multibagger 2022 Analysis

This article we can explore the possibility of Supreme Petrochem Ltd as a multibagger 2022 Stock based on Value Investing principles.

Website https://supremepetrochem.com
CMPRs.797.00

About Supreme Petrochem Ltd

SPL is the leader in Polystyrene business in the Indian market place with a share of more than 50%. SPL is also the largest exporter of PS from India, exporting to over 80 countries around the globe. Currently SPL’s exports are over 100,000 Tons/Year. Supreme Petrochem Ltd (SPL), owns and operates a state-of-the art Polystyrene facility, with an installed capacity of 2,72,000 TPA located at Nagothane in Raigad District, about 100 Kms south-east of Mumbai city. The facility also includes a world class colouring and compounding facility with an installed capacity of 17000 TPA. The Plant is based on technology from the erstwhile Huntsman Chemical Corporation (Now NOVA Chemicals) USA with basic engineering by ABB Lummus Crest, USA.

SUPREME PETROCHEM LTD (SPL) owns and operates state-of-the art production facilities from two locations in India, the first at Amdoshi – Wangani Village near Nagothane in District Raigad Maharashtra and the Second in New Manali Town near Chennai in Tamil Nadu.SPL exports its Products to more than 100 Countries around the Globe. The Infrastructure at the facility is geared to handle upto a million tons of Polymers and the New Manali Town facility manufactures Expandable Polystyrene (EPS).

Supreme Petrochem Ltd is India’s largest producer and exporter of polystyrene polymer based in Mumbai, Maharashtra, India. In Indian market it has share of more than 50%. SPL is also the largest exporter of PS from India. SPL’s reputation as a reliable supplier is due to its internationally acclaimed safety record in plant operation and total compliance with global and local standards on EHS. Its operations are ISO 9001, ISO 14001 and ISO 45001 certified. A strong online customer feedback system on quality of products and services is the essence of SPL’s quest for continuous improvement.

Supreme Petrochem Ltd is an India-based company, which is mainly engaged in the business of styrenics. The Company’s primary operating segment is Styrenics business. The Company manufactures polystyrene (PS), expandable polystyrene (EPS), masterbatches and compounds of styrenics and other polymers, extruded polystyrene insulation board (XPS) styrene methyl methacrylate (SMMA) with manufacturing facilities at Amdoshi district Raigad, Maharashtra and Manali New Town, Chennai, Tamil Nadu. The Company’s product offering includes General Purpose Polystyrene (GPPS), High Impact Polystyrene (HIPS), Masterbatches and Compounds, SMMA and Compounds, Expandable Polystyrene (EPS), and XPS INSUboard.

Supreme Petrochem Ltd. is at the forefront of styrenics in India. And has a strong international presence as well. With a market share exceeding 50%, the company remains the undisputed leader in India . At the same time, exports to over 70 countries worldwide testify to SPL’s considerable technological strengths.

SPL is promoted jointly by The Supreme Industries Ltd., the country’s largest plastic product company, and the well established, highly diversified R. Raheja Group. The company’s state-of-the art manufacturing facility is located at a sprawling 350 acres complex at Amdoshi, 120 km from Mumbai.

The company has an fully automated DCS controlled plant will soon have a total installed capacity of 272,000 TPA. This includes a dedicated, new generation 17,000 TPA Compounding facility, commissioned in 2002. Feasibility studies for an Expandable Polystyrene (EPS) project are also underway. Once implemented, it will add a further 40,000 TPA to the plant’s overall capacity. The facility is powered by technology from the erstwhile Huntsman Chemical Corporation, USA (now with Nova Chemicals, Canada ).

SPL has over 50% market share in the polystyrene segment. It is the only domestic manufacturer of extruded PS foam board and styrene methyl methacrylate giving it a strong market position. SLP has manufacturing facilities at Amdoshi, Maharashtra, & Manali New Town, Tamil Nadu.It has an installed capacity of Polystyrene – 2,72,000MT; expandable polystyrene – 72,100MT; polymers and compounds – 33,500MT; extruded PS – 5,000MT.

During FY21, LG Polymers India Ltd’s, second largest polystyrene (PS) manufacturer in India Had to shut down its facility post a styrene vapour leakage incident at its Vizag plant. This resulted in more than 30% volume growth for SPL on account of the diversion of the incremental volumes catered by LG Polymers. The Company bought back 24.81 lacs equity shares under its Buy Back Scheme which ended in September 2020 for a total outlay of 49 crores.

SPL plans to enter the mass acrylonitrile butadiene styrene (ABS) market, with an initial capacity of around 60,000 tpa to 80,000 tpa by setting up a new line at the existing plant over FY22-FY24. The Co incurred a total expenditure of 26 crores on ongoing projects related to PS and EPS at Amdoshi and Manali plants during FY21. In FY22, the Co has planned capital expenditure of 260 crores for Speciality Polymers & Compound and hardware replacement at both its plant locations. These projects will add 90,000 MTA of PS and 30,000 MTA of EPS capacity.

Supreme Petrochem Ltd Multibagger 2022 Analysis

Products & Services

  • General Purpose Polystyrene
  • High Impact Polystyrene
  • SMMA and Compounds
  • Expandable Polystyrene
  • XPS INSUboard
  • Masterbatches and Compounds

Profit & loss

image 1

Warren Buffett Checklist

FactorValue
Economic moatModerate
GrowthGood
ValuationGood
DebtGood
IntegrityGood

Positives

  • Company is India’s largest supplier of Styrenics
  • High Growth & ROCE observed
  • Capacity Expansion underway
  • Company has delivered good profit growth of 30% CAGR over last 5 years
  • Zero Debt company
  • Promoter holdings increased
  • Intrinsic Value Discount above 75%

Negatives

  • Highly capital intensive sector
  • Lockdown sensitive sectors

Summary

As per the Expansion & Value Investing grounds the company is having Multibagger Properties.

DISCLAIMER

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