Multibagger Debt-Free Stock Declares 100% Dividend & 1:2 Stock Split, Buy Stock With Rs. 873 Target Price

Top brokerage firm KR Choksey has given a buy rating to the stock of Supreme Petrochemicals Ltd. for a sharp near-term return. This week, the Board of Directors of the company declared an interim dividend of Rs. 4/ share (100% dividend), and also approved a stock split in the ratio of 1:2, along with announcing its Q2 earnings. The board has fixed November 4, 2022 as the Record Date of the Interim Dividend. Additionally, Value Research data informs that Supreme Petrochemicals is a debt-free stock.

Stock To Buy: Target Price

The Current Market Price (CMP) of Supreme Petrochemicals Ltd. is around Rs. 687. KR Choksey has estimated a Target Price for the stock at Rs. 873. This stock has the potential to give a 27.1% return, in the upcoming 1 year. It is a mid-cap stock with a market capitalization of around Rs. 7089 crore. In the last 5 years, its share price surged by 105%, making it a multi-bagger stock.

Stock Outlook
Current Market Price (CMP)	Rs. 687
Target Price	Rs. 873
Potential Upside	27.10%
52-week high share price	Rs. 1,025
52-week low share price	Rs. 617.15

Stock Valuation:

Giving a buy rating, KR Choksey stated, "With enhanced capacity and healthy demand from end-user industries, SPL will witness strong growth in the future. The stock is currently trading at a P/E multiple of 10.3x/7.9x on its FY23E/24E revised EPS of Rs. 67.0/87.3 respectively. We continue to value the stock at 10x on its FY24E EPS of Rs. 87.3, which yields a target price of Rs. 873/share, an upside of 27.1% over the current market price. Accordingly, we maintain our buy rating on the shares of Supreme Petrochem Ltd."

Capacity expansion

To cater to the increasing demand, SPL is undergoing capital expenditure for brownfield expansion to enhance its existing Polystyrene, EPS, Masterbatches & Compounds and XPS capacities. Projects for setting up of 4th line of Polystyrene. Expansion of EPS at Manali plant, barring unforeseen circumstances, would be completed by end of November 2022. The above projects would add around 1,20,000 mtpa of additional Polystyrene/Expandable Polystyrene capacity to Supreme Petro's current capacity.

Q2 Earnings

Supreme Petrochem's (SPL) revenues saw muted growth of 3.7% YoY to Rs. 12,346 mn. Though on QoQ basis revenue declined by 16.9%. The muted growth in revenue was on account of lower volume offtake as well as subdued realisations. EBITDA witnessed a drastic fall of 55.3 YoY/68.7% QoQ to Rs. 787 mn. EBITDA margin contracted by 841 bps YoY/1,057 bps QoQ to 6.4%. The fall in margin was due to rise in raw material costs and other expenses. PAT stood at Rs. 596 mn, declining by 53.1% YoY/68.5% QoQ, while PAT margin contracted by 584 bps YoY/790 bps QoQ to 4.8%.

Disclaimer

The above stock was picked from the brokerage report of KR Choksey. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.