Polycab India profit rises 31% in Q4: What brokerages are saying?

Wires and cable manufacturing company Polycab India reported a 31 percent rise in its consolidated net profit for the quarter ending March 2023 to Rs 425 crore as against Rs 322 crore reported last year.

The company's consolidated revenue from operations stood at Rs 4,324 crore, up 9 percent from Rs 3,970 crore reported in Q4FY22.

The company posted its highest-ever sales and post-tax profit in FY23, said foreign brokerage firm Jefferies, which has a ‘buy’ rating on it at a target price of Rs 4,290.

“Polycab is our key SMID pick and has been consistently showcasing strong execution over recent quarters,” it said, however, FMEG (fast-moving electrical goods) was impacted by distribution rejig, higher A&P (advertising and promotion) spends and inflation. “We view Polycab as a beneficiary of infra/capex/housing revival, and raise the FY24-26 EPS by 2-4 percent,” it said.

Morgan Stanley has an ‘equal-weight’ rating on the company at a target of Rs 2,947. C&W (cables and wires) segment, FY23 and Q4 volume growth was 21 percent and high single-digit, respectively, it said with cables accounting for 70 percent and wires 30 percent of volume.

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The management continues to guide for an EBITDA (earnings before interest, taxes, depreciation and amortisation) margin of 11-13 percent with FY24 capex target of Rs 600-700 crore.

“The company aims to achieve Rs 200 billion revenue by FY26 under Project LEAP, given (1) sustained growth from infrastructure/real estate/ construction activities, (2) focus on B2C through deepening reach and premiumisation of product portfolio, (3) continued GTM expansion, and (4) gains from shift in consumer demand from unorganised to organised sector,” said domestic brokerage Prabhudas Lilladher who maintains a ‘hold’ rating on the company at a revised target price of Rs 3,249.

Polycab reported a healthy revenue growth of 16 percent YoY in FY23 and 9 percent YoY in Q4FY23, despite high base and lower commodity prices on the back of healthy volume growth in cables business, it said and believes profitability (52 percent/32 percent in FY23/Q4FY23) was largely, led by volume growth and improvement in margins by 270bps/200bps through judicious price revisions and favourable business mix.

The brokerage expects 14.1 percent/14.8 percent sales/PAT CAGR (compounded annual growth rate) respectively over FY23-25, on the back of healthy domestic demand environment supported by government measures and revival in private capex and strong traction in export revenue with increase in international coverage.

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“Accordingly, we increase our FY24/FY25 earnings estimate by 2.7 percent/3.8 percent to mainly reflect upward revision in top-line growth assumption and margin improvement with product mix,” it said.

The company has beaten street expectations significantly, reaffirming strong growth, especially which cables are witnessing, wrote analysts at Nuvama.

“Given the robust demand scenario and Polycab’s execution, we upgrade our FY24/25 EPS by 11 percent/14 percent and revise our target price to Rs 4,000 (from Rs 3,200),” the brokerage said, giving the stock a ‘buy’ rating.

The company’s market cap has jumped over 30 percent in the last six months and around 10 percent in the last month. At 10.43am, the scrip was trading 0.58 percent up on the NSE at Rs 3,400.80 with benchmark Nifty trading 0.10 percent down at 18,384.30 points.

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