Buy Polycab India; target of Rs 6021: Prabhudas Lilladher

Prabhudas Lilladher's research report on Polycab India

Polycab reported healthy revenue growth of 16.8% YoY in Q3FY24, even after disruption in business during last ten days of Dec-23 due to IT raid at various locations. Growth was largely from cable business on the back of robust volume growth in domestic business. Regarding income tax searches, Polycab reiterated that as on date, the company had not received any written communication from IT dept. The company expects sustained volume growth in dom. C&W business on the back of strong demand environment, supported by government's continuous focus on infrastructure development and pickup in private capital expenditure. Accordingly, Polycab is expected to achieve Rs 200bn revenues sooner than targeted by FY26E under Project LEAP. We expect Revenue/EBITDA/PAT CAGR of 19.0%/20.9%/21.9% over FY23-26E led by strong domestic demand environment supported by government measures & revival in private capex. Upgrade to ‘BUY’.

Outlook

We upgrade our rating from Accumulate to ‘BUY’ at an unchanged TP of Rs 6,021 valuing at PE of 39x FY26E earnings, given significant correction in stock prices on concerns of tax evasion.