SUPREMEIND - Investment Analysis: Buy Signal or Bull Trap?

📈 Positive

• Strong ROCE & ROE: ROCE at 23.7% and ROE at 18.1% reflect excellent capital efficiency and profitability.
• Low Debt-to-Equity: 0.06 indicates a robust balance sheet with minimal leverage.
• EPS of ₹63.9: Supports consistent earnings strength.
• DII Holding Increase: 1.37% signals growing domestic institutional confidence.
• Dividend Yield: 0.88% offers modest income potential.

⚠️ Limitation

• High P/E Ratio: 61.4 vs industry average of 23.2 implies steep valuation.
• Elevated PEG Ratio: 28.3 suggests expensive pricing relative to growth.
• RSI at 26.6: Deeply oversold, indicating weak momentum but potential for reversal.
• MACD Negative: -126 signals bearish trend continuation.
• FII Holding Decline: -1.28% may reflect cautious foreign sentiment.

📰 Company Negative News

• Q2 FY26 PAT dropped 20% YoY to ₹165 Cr. due to margin pressure despite 5% revenue growth

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• Stock fell 5% post earnings; brokerages cut price targets citing weak margins and volume guidance

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🌟 Company Positive News

• Wavin India acquisition and OPVC pipe expansion expected to boost FY26 volumes and product mix

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• Management expects H2 demand recovery from agriculture and infrastructure segments

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🏭 Industry

• Supreme Industries operates in the plastic processing and piping systems sector, benefiting from infrastructure, housing, and irrigation demand.
• Industry PE of 23.2 reflects moderate valuation expectations amid raw material cost volatility and cyclical demand.

🧾 Conclusion

• Ideal Entry Zone: ₹3,750–₹3,850, below DMA50 and RSI 30 for favorable risk-reward entry.
• Holding Strategy: If already invested, hold for 1–2 years to benefit from volume recovery, product expansion, and dividend income. Monitor margin trends and institutional flows.
• Exit Strategy: Consider partial exit near ₹4,800–₹5,000 if RSI exceeds 70 or valuation becomes stretched.

Sources

CNBCTV18

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