The Supreme Industries Ltd

Q4FY11 Result Update

Enhancing investment decisions

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Explanation of CRISIL Fundamental and Valuation (CFV) matrix

The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process Analysis of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental grade is assigned on a five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The valuation grade is assigned on a five-point scale from grade 5 (indicating strong upside from the current market price (CMP)) to grade 1 (strong downside from the CMP).

CRISIL Fundamental Grade

5/5 4/5 3/5 2/5 1/5

Assessment
Excellent fundamentals Superior fundamentals Good fundamentals Moderate fundamentals Poor fundamentals

CRISIL Valuation Grade

5/5 4/5 3/5 2/5 1/5

Assessment
Strong upside (>25% from CMP) Upside (10-25% from CMP) Align (+-10% from CMP) Downside (- 10-25% from CMP) Strong downside (<-25% from CMP)

Analyst Disclosure
Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest that can bias the grading recommendation of the company.

Disclaimer:
This Company-commissioned Report (Report) is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. The Data / Report are subject to change without any prior notice. Opinions expressed herein are our current opinions as on the date of this Report. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information only of the authorized recipient in India only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person especially outside India or published or copied in whole or in part, for any purpose.

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The Supreme Industries Ltd.

As expected, robust growth
Fundamental Grade Valuation Grade Industry 4/5 (Superior fundamentals) 4/5 (CMP has upside) Chemicals

July 28, 2011

Fair Value Rs 239 CMP Rs 209

CFV MATRIX
Excellent Fundamentals

Fundamental Grade

The Supreme Industries Ltds (Supremes) Q4FY11 revenues and profitability were in line with CRISIL Researchs expectations. Growth across product segments strongly boosted revenues and the company was able to maintain margins, leading to improved profitability. We maintain our earnings estimates for FY12 and FY13. Based on our positive outlook for the plastic products industry and Supremes supremacy in the sector, we are maintaining the fundamental grade of 4/5.

5 4 3 2 1

Q4FY11 result analysis Supremes Q4FY11 revenues grew by 11.4% y-o-y to Rs 7,482 mn. All business segments plastic pipes and fittings, packaging products, consumer products and industrial products delivered a strong

Poor Fundamentals

Valuation Grade
Strong Downside Strong Upside

performance. FY11 revenues were up 22% over FY10. EBITDA margin was slightly better y-o-y at 15.2% (15.0% in Q4FY10). We believe margins in the plastic products business, will remain stable in FY12 and FY13. FY11 EBITDA margin was slightly lower at 14.5% vis-a-vis 14.8% in FY10. PAT margin improved by 45 bps y-o-y to 8.1%. PAT grew y-o-y by 18.1% in Q4FY11, driven by stable margins and growth in revenues. EPS for Q4FY11 was Rs 4.7 compared to Rs 4.0 in Q4FY10. For FY11, EPS improved by 25% at Rs 15.3

KEY STOCK STATISTICS

NIFTY / SENSEX NSE / BSE ticker Face value (Rs per share) Shares outstanding (mn) Market cap (Rs mn)/(US$ mn) Enterprise value (Rs mn) /(US$ mn) 52-week range (Rs) (H/L) Beta Free float (%) Avg daily volumes (30-days) Avg daily value (30-days) (Rs mn) 5488/18210 SUPREMEIND 2 127.0 26,511/601 31,481/713 840/136 0.9 50.4% 180,177 36.0

Valuations: Current market price has upside We have used the discounted cash flow method to value Supreme. We maintain our fair value of Rs 239 per share. At the current market price of Rs 209, the valuation grade is 4/5.

SHAREHOLDING PATTERN KEY FORECAST

(Rs mn) Operating income EBITDA Adj Net income EPS-Rs EPS growth (%) PE (x) P/BV (x) RoCE(%) RoE(%) EV/EBITDA (x) FY09 16,587 2,547 852 6.7 76.2 7.6 2.1 33.2 29.6 3.5 FY10 20,155 2,974 1,555 12.2 82.6 9.3 3.5 38.4 43.3 5.6 FY11 24,638 3,573 1,941 15.3 24.9 13.7 4.8 34.6 40.4 8.8 FY12E 27,933 4,121 2,126 16.7 14.6 12.5 4.2 36.2 36.4 7.3 FY13E 33,543 5,459 2,890 22.8 36.0 9.2 3.3 41.2 40.2 5.4 1-m Supreme NIFTY 19% 4%
100% 90% 80% 70% 60% 50% 40% 30% 49.6% 20% 10% 0% Jun-10 Promoter Sep-10 FII Dec-10 DII Mar-11 Others 49.6% 49.6% 49.6% 0.4% 3.9% 0.5% 4.1% 1.1% 4.2% 1.3% 6.8% 46.0% 45.8% 45.1% 42.3%

PERFORMANCE VIS--VIS MARKET

Returns 3-m 32% -3% 6-m 36% -0.1% 12-m 72% 4%

NM: Not meaningful; CMP: Current Market Price, Financial year ending June Note: Financials have been adjusted for a 5-for-1 stock split in October 2010. Source: Company, CRISIL Research estimate

ANALYTICAL CONTACT
Sudhir Nair (Head) Niyati Dave Bhaskar Bukrediwala Client servicing desk +91 22 3342 3561 clientservicing@crisil.com snair@crisil.com ndave@crisil.com bsbukrediwala@crisil.com

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The Supreme Industries Ltd.

Q4FY11 Result Summary
(Rs mn) Net sales Raw materials cost Raw materials cost (% of net sales) Employees cost Other expenses EBITDA EBITDA margin Depreciation EBIT Interest and finance charges Operating PBT Other Income PBT Tax PAT Share of Profit in Associate Adj PAT Adj PAT margin No of equity shares (mn) Adj EPS (Rs) Source: Company, CRISIL Research Q4FY11 7,482 5,008 66.9% 310 1,024 1,139 15.2% 161 978 123 855 12.1 868 327 540 62 603 8.1% 127 4.7 Q3FY11 6,625 4,427 66.8% 230 1,132 837 12.6% 164 673 129 544 0.5 544 150 394 88 483 7.3% 127 3.8 Q4FY10 q-o-q (%) y-o-y (%) 6,715 4,711 70.1% 279 717 1,008 15.0% 161 848 58 789 (5.9) 783 273 510 (1.1) 510 7.6% 127 4.0 12.9 13.1 12bps 35.0 (9.5) 36.2 260bps (1.6) 45.3 (4.9) (66.2) NM 59.4 118.2 37.0 (29.4) 24.8 77bps 24.8 11.4 6.3 -321bps 11.1 42.8 13.0 21bps (0.3) 15.5 113.2 8.4 NM 10.8 20.0 5.8 NM 18.1 45bps 18.1 FY11 24,695 15,914 64.4% 968 4,239 3,574 14.5% 619 2,955 425 2,530 44.9 2,575 877 1,697 261.1 1,958 7.9% 127 15.4 FY10 y-o-y (%) 20,162 13,165 65.3% 799 3,211 2,987 14.8% 529 2,457 331 2,127 41.8 2,169 748 1,421 139.0 1,560 7.7% 127 12.3 22.5 20.9 -85 bps 21.1 32.0 19.7 -34 bps 16.94 20.2 28.62 0.19 7.3 18.7 17.3 19.5 87.9 25.6 19 bps 26

EBITDA margins improved marginally y-o-y...

(Rs mn) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 4,883 5,120 6,715 4,734 5,852 6,625 7,482 14.9% 14.4% 17.2% 15.2% 15.0% 13.9% 12.6% 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

... so did PAT margins

(Rs mn) 700 600 7.6% 500 7.4% 400 300 200 100 359 0 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 371 510 371 412 483 603 7.2% 7.0% 7.3% 7.8% 8.1% 8.2% 8.0% 7.8% 7.6% 7.4% 7.2% 7.0% 6.8% 6.6% 6.4%

Revenue

EBITDA margin (RHS)

PAT

PAT margin (RHS)

Source: Company, CRISIL Research

Source: Company, CRISIL Research

Share price movement

700 600 500 400 300 200 100 0
Nov-07 Nov-08 Jan-10 May-07 May-08 May-09 Feb-08 Mar-07 Feb-09 Jan-11 Jul-09 Jul-10 Aug-07 Aug-08 Oct-09 Apr-10 Oct-10 Apr-11 Jul-11

Fair value movement since initiation

(Rs) 300 250 200 150 100 50 0
13-Jul 14-Jul 15-Jul 18-Jul 19-Jul 20-Jul 21-Jul 22-Jul 25-Jul

('000) 800 700 600 500 400 300 200 100 0

Supreme

NIFTY

Total Traded Quantity (RHS)

Fair Value

Supreme

-indexed to 100 Source: NSE, CRISIL Research Source: NSE, CRISIL Research

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The Supreme Industries Ltd.

VALUATION
We continue to use the discounted cash flow method to arrive at a fair value of Rs 239 for Supreme.

One-year forward P/E band

(Rs) 250 200

One-year forward EV/EBITDA band

(Rs mn) 35,000 30,000 25,000

150

20,000 15,000 10,000

100 50

5,000 0
May-08 May-09 May-10 May-11 Jul-08 Jul-09 Jul-10 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Jul-11 Jan-08 Nov-08 Jan-09 Nov-09 Jan-10 Nov-10 Jan-11

May-08

May-09

May-10

May-11 May-11

Mar-08

Sep-08

Mar-09

Sep-09

Mar-10

Sep-10

Mar-11 Mar-11

Jul-08

Jul-09

Jul-10

Jan-08

Nov-08

Jan-09

Nov-09

Jan-10

Nov-10

Supreme Industries

2x

4x

6x

8x

10x

EV

3x

4x

5x

Jan-11

6x

Source: NSE, CRISIL Research

Source: NSE, CRISIL Research

P/E premium/discount to NIFTY

10% 0% -10% -20% -30% -40% -50% -60% -70% -80% -90%
Jan-08 Nov-08 Jan-09 Nov-09 Jan-10 Nov-10 Jan-11 May-08 May-09 May-10 May-11 Mar-08 Jul-08 Mar-09 Jul-09 Mar-10 Jul-10 Mar-11 Jul-11 Sep-08 Sep-09 Sep-10

P/E movement
16 14 12 10 8 6 4 2 0 -1 std dev +1 std dev

Jan-08

Nov-08

Jan-09

Nov-09

Jan-10

Nov-10

May-08

May-09

May-10

Mar-08

Mar-09

Mar-10

Jan-11

Jul-08

Jul-09

Jul-10

Sep-08

Sep-09

Premium/Discount to NIFTY

Median premium/discount to NIFTY

1yr Fwd PE (x)

Median PE

Source: NSE, CRISIL Research

Source: NSE, CRISIL Research.

CRISIL IER reports released on The Supreme Industries Ltd

Fundamental Date 14-Jul-11 28-Jul-11 Nature of report Initiating coverage* Q4FY11 result update grade 4/5 4/5 Fair value Rs 239 Rs 239 Valuation grade 4/5 4/5 CMP (on the date of report) Rs 192 Rs 209

* For detailed initiating coverage report please visit: www.ier.co.in CRISIL Independent Equity Research reports are also available on Bloomberg (CRI <go>) and Thomson Reuters.

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Sep-10

Jul-11

Jul-11

The Supreme Industries Ltd.

FINANCIALS
Income statement (Rs mn) Operating income EBITDA EBITDA margin Depreciation EBIT Interest Operating PBT Other income Exceptional inc/(exp) PBT Tax provision Minority interest PAT (Reported) Less: Exceptionals Adjusted PAT Ratios FY09 Growth Operating income (%) EBITDA (%) Adj PAT (%) Adj EPS (%) Profitability EBITDA margin (%) Adj PAT Margin (%) RoE (%) RoC E (%) RoIC (%) Valuations Price-earnings (x) Price-book (x) EV/EBITDA (x) EV/Sales (x) Dividend payout ratio (%) Dividend yield (%) B/S ratios Inventory days C reditors days Debtor days Working capital days Gross asset turnover (x) Net asset turnover (x) Sales/operating assets (x) C urrent ratio (x) Debt-equity (x) Net debt/equity (x) Interest coverage Per share FY09 Adj EPS (Rs) C EPS Book value Dividend (Rs) Actual o/s shares (mn) 6.7 10.8 23.9 2.8 127.0 FY10 12.2 16.4 32.6 4.2 127.0 FY11 15.3 20.2 43.1 5.0 127.0 FY12E 16.7 22.9 50.3 6.8 127.0 FY13E 22.8 30.3 63.0 8.6 127.0 49 98 25 (7) 1.9 3.3 2.8 1.0 1.1 0.8 3.0 68 87 24 (2) 2.2 3.6 3.3 1.2 0.6 0.5 7.2 67 56 23 23 2.3 3.8 3.7 1.7 0.9 0.9 6.6 58 95 24 (4) 2.0 3.2 3.1 1.0 0.6 0.5 8.0 43 95 24 (10) 2.0 3.2 3.1 0.9 0.5 0.4 9.8 Quarterly financials (Rs mn) Net Sales C hange (q-o-q) EBITDA C hange (q-o-q) EBITDA margin PAT Adj PAT C hange (q-o-q) Adj PAT margin Adj EPS Q4FY10 6,715 31% 1,008 37% 15.0% 510 510 38% 7.6% 4.0 Q1FY11 4,734 -30% 814 -19% 17.2% 403 371 -27% 7.8% 2.9 Q2FY11 5,852 24% 816 0% 13.9% 412 412 11% 7.0% 3.2 Q3FY11 6,625 13% 837 3% 12.6% 395 483 17% 7.3% 3.1 Q4FY11 7,482 13% 1,139 36% 15.2% 540 603 25% 8.1% 4.7 7.6 2.1 3.5 0.5 39.3 5.5 9.3 3.5 5.6 0.8 34.2 3.7 13.7 4.8 8.8 1.3 32.4 2.4 12.5 4.2 7.3 1.1 40.9 3.3 9.2 3.3 5.4 0.9 38.0 4.1 15.4 5.1 29.6 33.2 31.2 14.8 7.7 43.3 38.4 40.0 14.5 7.9 40.4 34.6 35.9 14.8 7.6 36.4 36.2 35.1 16.3 8.6 40.2 41.2 38.9 Cash flow (Rs mn) Pre-tax profit Total tax paid Depreciation Working capital changes Net cash from operations Cash from investments C apital expenditure Investments and others Net cash from investments Cash from financing Equity raised/(repaid) Debt raised/(repaid) Dividend (incl. tax) Others (incl extraordinaries) Net cash from financing C hange in cash position C losing cash (268) 74 (357) 109 (441) 410 870 (959) (534) 78 (1,414) (683) 187 2,822 (635) 30 2,217 (45) 142 600 (870) (148) (418) (120) 211 100 (1,098) (187) (1,185) 374 584 (1,525) 40 (1,486) 39 (197) (158) (2,550) (223) (2,773) (2,600) (223) (2,823) (3,100) (249) (3,349) FY09 1,339 (367) 525 839 2,336 FY10 2,304 (693) 529 (1,251) 889 FY11 2,819 (780) 629 (2,155) 512 FY12E 3,173 (1,047) 781 213 3,121 FY13E 4,314 (1,424) 953 1,064 4,908 26.4 71.5 62.1 76.2 21.5 16.8 82.6 82.6 22.2 20.2 24.9 24.9 16.4 19.6 14.6 14.6 20.1 32.5 36.0 36.0 FY10 FY11 FY12E FY13E FY09 16,587 2,547 15.4% 525 2,021 681 1,341 (2) 57 1,396 487 908 57 852 FY10 20,155 2,974 14.8% 529 2,444 339 2,105 199 5 2,309 749 1,560 5 1,555 FY11 24,638 3,573 14.5% 629 2,944 444 2,500 319 17 2,836 877 1,958 17 1,941 FY12E 27,933 4,121 14.8% 781 3,339 415 2,924 249 3,173 1,047 2,126 2,126 FY13E 33,543 5,459 16.3% 953 4,506 458 4,048 266 4,314 1,424 2,890 2,890 Balance Sheet (Rs mn) Liabilities Equity share capital Reserves Minorities Net worth C onvertible debt Other debt Total debt Deferred tax liability (net) Total liabilities Assets Net fixed assets C apital WIP Total fixed assets Investments Current assets Inventory Sundry debtors Loans and advances C ash & bank balance Marketable securities Total current assets Total current liabilities Net current assets Intangibles/Misc. expenditure Total assets 1,683 1,153 535 870 4,240 4,128 112 6,934 2,906 1,310 793 187 5,197 4,517 680 7,130 3,454 1,529 1,412 142 6,537 3,747 2,790 11,385 3,448 1,816 1,117 211 6,592 6,787 (195) 10,782 3,012 2,181 1,342 584 7,119 8,005 (886) 12,488 5,431 895 6,326 496 5,626 131 5,757 693 7,417 262 7,678 916 9,532 331 9,863 1,114 11,579 431 12,010 1,364 254 2,787 3,041 3,250 3,250 643 6,934 254 3,887 4,141 2,291 2,291 698 7,130 254 5,223 5,477 5,112 5,112 795 11,385 254 6,139 6,393 3,691 3,691 698 10,782 254 7,745 7,999 3,791 3,791 698 12,488 FY09 FY10 FY11 FY12E FY13E

Note Share of profits in Supreme Petrochem for FY11E (included in Other Income) is for 9M ended March 2011, Financial year for the company ends in June, Financials have been adjusted for a 5-for-1 stock split in October 2010. Source: Company, CRISIL Research estimate

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CRISIL Research Team

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