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Buy Polycab India, target price Rs 857: Yes Securities

The brokerage believes earnings revival over the next 2-3 years would be led by market share gains in the FMEG business.

Last Updated: Jun 03, 2020, 03.11 PM IST
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Yes Securities has given a buy rating to Polycab India with a target price of Rs 857 based on 18 times FY22E P/E.

According to Yes Securities, Polycab’s revenue was weaker than expected due to sluggish domestic market and revenue loss of Rs 6.1 billion due to lockdown. Export revenues jumped 3.4 times year on year and was flat on a sequential basis led by execution of Dangote order and higher revenues from the US. The company has executed orders worth Rs 7.5 billion of the total Rs 11 billion order from Dangote. Margins surprised positively led by improvement in product mix and price hikes taken in some FMEG (fast moving electrical goods) segments. PAT outperformance was aided by jump in other income (114.1 per cent year on year) and higher margins (423bps year on year).

Investment Rationale

The brokerage believes earnings revival over the next 2-3 years would be led by market share gains in the FMEG business. It has cut the FY21/22 estimates by 34.5 per cent/26.4 per cent factoring in slower recovery in the housing wire segment . The brokerage maintains a buy rating on the stock with a revised target price of Rs 857.

Near term, the stock performance would be subdued due to concerns over demand revival in Cables and Wires (C&W) segment. Valuation rerating would be gradual as FMEG share increases.

Risk to the call is a sharp fall in C&W market . Lower market share gains in the FMEG segment.


For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 2129.38 crore, down -15.07 per cent from last quarter sales of Rs 2507.31 crore and down -12.90 per cent from last year's same quarter sales of Rs 2444.80 crore. The company reported net profit after tax of Rs 220.93 crore in the latest quarter.

Promoter/FII Holdings

Promoters held 68.58 per cent stake in the company as of March 31, 2020, while FIIs held 4.89 per cent, DIIs 13.23 per cent and public and others 13.3 per cent.
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