Dolat Capital Market's research report on Polycab India
Revenues came in at Rs21.1bn, down by 6% YoY, while EBITDA at Rs3.1bn was up 15% YoY but PAT was up by 14% YoY at Rs2.2bn ahead of estimates as outlined in Exhibit 1. CCC days was flat compared to Q4FY20 at 85 days in Q2FY21, but inventory was higher at 96 days compared to 80 days in March 2020 quarter. Cash generated from operations in H1 was Rs7.8bn with a net C&CE of Rs6.8bn. Wires & Cables margins came in higher by 340bps YoY at 13.9% while FMEG margins saw an exponential increase of 470bps YoY to 8.0% in Q2FY21. While FMEG margins hit a new high of 8% in Q2, it was aided by low A&P spend, which we expect to return to normal in H2, as bulk of the IPL spend gets expensed out in Q3.
We maintain our Accumulate rating and roll forward to Sep 22, valuing the stock at 16x Sep22E for a TP of Rs 1000 and recommend buying it on dips. We increase of FY21/22 PAT estimates by 21% and 14% respectively. We expect the stock to get rerated in line with its mix changing from being 35% B2C to 50% B2C over the medium term.
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