Prabhudas Lilladher's research report on Polycab India
We upward revised our FY24/25E earnings estimates by 14.8%/12.7% and upgrade to ‘Accumulate’ from ‘HOLD’ to mainly reflect revision in top-line growth assumption (6.8%/9.1% in FY24/FY25) and margin improvement (~13.5% EBITDA margin) with segment & product mix. Polycab reported strong revenue growth of 42.1% YoY in Q1FY24, despite high base and fluctuation in commodity prices on the back of robust volume growth (~53%) in W&C business. The company expects to achieve Rs 200bn revenues sooner than targeted by FY26E under Project LEAP given 1) strong volume growth in W&C from infrastructure/real estate/construction activities (which accelerated institution business growth), 2) focus on B2C through deepening reach & premiumization of product portfolio and 3) expected market share gain of ~2% in coming years with wide SKUs, availability of products, logistics support etc.
Outlook
We expect Revenue/EBITDA/PAT CAGR of 19.3%/20.7%/22.2% over FY23-25E led by strong domestic demand environment supported by government measures & revival in private capex along with strong traction in export revenue. Upgrade to ‘Accumulate’ from ‘HOLD’ at revised TP of Rs 4760 (Rs 3553 earlier) given solid Q1 performance and strong guidance for coming years.
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