Buy Polycab, India; target of Rs 2197: Anand Rathi

An Edelweiss research report for Q4FY21 says road tonnage continued to improve, evident in e-way bill generation (up 6% QoQ) and improved core trucking rentals. “We estimate tonnage would increase by three–five percent for truckers. Asset-light plays Mahindra Logistics and TCI Express remain our preferred picks due to their ability to scale up/down as the environment demands,” the report said. Edelweiss is bullish on Blue Dart Express due to the pandemic-induced boom in e-commerce and its leaner cost structure. It has retained a ‘buy’ call on Mahindra Logistics, TCI Express and Blue Dart Express.

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Anand Rathi's research report on Polycab, India

Polycab’s management sees the weaker-than-anticipated Q1 as a blip, and drivers of long-term growth intact. Rising infra spend, export opportunities and its expansion to adjacent categories would drive its B2B portfolio. A 25%+ revenue CAGR and margin expansion in FMEG would continue. It will elaborate next quarter on its vision of over Rs200bn revenue by FY26 (implied CAGR: 18%). We are optimistic on Polycab’s prospects and expect 24%/23% CAGRs in revenue/PAT over FY21-23 with the RoE nearing 20% and healthy FCF continuing.

Outlook

Thus, we retain a Buy, with a target of Rs.2,197 (24x/28x FY23e P/Es for W&C/FMEG). Growth/margin recovery is key to support a re-rating.

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