CRISIL Research has upgraded a CRISIL IER fundamental grade of 5/5 from 4/4 to  Supreme Industries. The grade indicates that the company’s fundamentals are 'excellent' relative to other listed equity securities in India. Our fair value of the stock is Rs 620 a share. At the current market price of Rs 650 a share, our valuation grade is 3/5 indicating that the current market price is aligned with our fair value.

CRISIL Research expects revenues to grow at a two-year CAGR of 14% to Rs 50.9 billion by FY16. The core business revenues are expected to grow at a two-year CAGR of 14% driven by the plastic piping segment. Sale of commercial real estate is expected to contribute Rs1.1 billion in FY15 and Rs 950 million in FY16. EBITDA margin is expected to decline from 14.9% in FY14 to 14.3% in FY16 as the company is likely to exhaust the industrial subsidy. PAT is expected to grow at a two-year CAGR of 20% to 4.1 billion by FY16. Supreme’s RoE is expected to remain healthy and vary in the range of 29-33% over FY14-16.

CRISIL Research has used the discounted cash flow method to arrive at a fair value of Rs 620 a share for Supreme. This fair value includes Rs 9 from commercial real estate and Rs 13 from Supreme’s 29.88% share in associate Supreme Petrochem. The implied P/E multiples are 20.8x FY15E EPS and 19.3x FY16E EPS.

Shares of the company gained Rs 0.3, or 0.05%, to settle at Rs 651.45. The total volume of shares traded was 3,305 at the BSE (Tuesday).