Supreme Industries Limited (SIL) delivered a mixed Q3FY26 performance, broadly meeting revenue expectations but falling short on profitability as fluctuating polymer prices resulted in inventory losses that compressed margins. Net sales rose 7.1% year-on-year to Rs26.9bn, supported by robust volume growth, while EBITDA increased a muted 1.6% YoY to Rs3.1bn. Adjusted net profit declined 18% YoY to Rs1.5bn, reflecting raw material volatility rather than structural weakness. Management commentary suggests demand conditions are stabilizing after prolonged channel destocking, aided by strong monsoons, improving rural sentiment, and renewed momentum in housing, agriculture, and infrastructure. IDBI Capital has upgraded the stock to BUY, rolling forward valuations to FY28E with a revised target price of Rs 4,285, implying a potential upside of 28% from current levels.

Q3FY26 Performance: Volume Strength, Margin Strain

Revenue growth held firm, but earnings lagged expectations.
Supreme Industries reported Q3FY26 revenues of Rs26,869mn, marginally ahead of estimates, driven by a healthy 13% YoY growth in sales volumes to 183,794 metric tonnes. However, EBITDA margins contracted sharply to 11.7%, missing estimates by nearly 180 basis points due to inventory losses arising from falling polymer prices.

Adjusted net profit declined to Rs1,534mn versus Rs1,870mn in Q3FY25, underscoring the near-term earnings pressure despite stable demand. Management clarified that these losses were timing-related and not indicative of demand erosion.

Pricing Pressures: Realizations Decline Despite Product Premiumization

Blended realizations weakened even as value-added products gained traction.
Average realizations fell 6% YoY to Rs145/kg, largely due to a similar decline in plastic segment pricing. This was partially offset by a strong performance in value-added offerings, where Q3 turnover rose 16% YoY to Rs11.18bn. Growth was driven by premium CPVC pipes, bathware, and industrial applications, reflecting successful product diversification and premiumization initiatives.

Segmental Trends: Piping Leads, Packaging Lags

Piping systems emerged as the clear outperformer.
Plastic piping volumes grew 16% YoY, supported by agri-linked demand and infrastructure activity. Consumer products recorded an 8% YoY volume increase, while industrial products remained largely flat due to weakness in appliance-linked components, despite resilience in auto-related demand. Packaging volumes rose a modest 2% YoY, reflecting subdued FMCG demand.

Quarterly Financial Performance (Q3FY26)

Industry Outlook: Polymer Cycle Turning Favorable

Management believes the downcycle has bottomed out.
Global polymer markets faced significant stress through CY25, marked by plant shutdowns and capacity rationalization. PVC prices have already risen by USD70 over the past six weeks, and management expects further firmness as loss-making capacities exit the system. This normalization is expected to support margin recovery from Q4FY26 onward.

Demand for plastic piping is returning to pre-destocking levels, particularly during the January–March pre-demand season, driven by housing revival, agricultural activity, and infrastructure spending.

Capacity Expansion: Positioning for the Next Growth Phase

Supreme Industries is scaling up aggressively for medium-term demand.
The company’s plastic piping capacity is set to reach nearly 1 million tonnes per annum by FY26-end, aided by greenfield expansions, debottlenecking, and integration of acquired units. Two additional greenfield plants are planned, with execution beginning in FY27 and commissioning expected by FY28, adding approximately 100,000 tonnes of incremental capacity.

FY26 capex is pegged at Rs12bn and will be entirely funded through internal accruals, underscoring the company’s strong balance sheet and debt-free status.

Guidance Update: Volumes Intact, Revenue Recalibrated

Volume growth guidance remains unchanged despite pricing headwinds.
Management reiterated FY26 volume growth guidance of 12–14%, with plastic piping expected to grow 15–17%. However, full-year revenue guidance has been revised down to Rs110–115bn from Rs120bn due to sustained polymer price deflation.

EBITDA margin guidance has been trimmed to 13.5–14%, factoring in inventory losses of Rs1,000–1,200mn during 9MFY26. Margins are expected to recover sequentially as raw material prices stabilize.

Valuation Reset: FY28 Earnings Drive Upside

IDBI Capital upgrades the stock to BUY.
The research house has rolled forward valuations to FY28E and assigned a 40x price-to-earnings multiple, arriving at a revised target price of Rs4,285 (earlier Rs4,146). At the current market price of Rs3,349, this implies a potential upside of 28%.

Supreme Industries trades at 31.3x FY28E earnings, which appears reasonable given its leadership position, expanding capacity, and improving demand outlook.

Investment View: Near-Term Noise, Structural Strength Intact

Short-term margin volatility should not overshadow long-term fundamentals.
While Q3FY26 profitability was impacted by inventory losses, Supreme Industries remains well-positioned to benefit from cyclical recovery in construction and agri-infrastructure demand. Its extensive distribution network, strong product portfolio, and debt-free balance sheet provide resilience through commodity cycles.

As polymer prices firm up and channel inventories normalize, earnings visibility is expected to improve materially from FY27 onward, supporting IDBI Capital’s BUY recommendation.

Key Investment Levels

Current Market Price (CMP): Rs3,349
Target Price: Rs4,285
Potential Upside: 28%
Recommendation: BUY