Hold Polycab India target of Rs 1977: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Polycab India

We cut our FY22 / FY23 earnings by 4.9% / 1% and downgrade the stock to Hold given 1) margin pressures on account of volatile RM prices and 2) slow pace of recovery within institutional portfolio. We remain structurally positive on longer terms prospects given 1) steady increase in B2C mix 2) pick up in renovation/ construction activities 3) sustained investments in brand building 4) gains from unorganized sector and 5) acquisition of Silvan Technologies and launch of IOT based ECD brand HOHM. We estimate Sales/ PAT CAGR of 22.5%/ 24.9% over FY21-23E. We value the stock on SOTP basis and arrive at a target price of Rs1,977 (derived PE of 22.8x Jun23 EPS; W&C/ FMEG valued at 24x/ 30x).

Outlook

However, given the sharp re-rating in the past 12 months’ we expect returns to be back ended. Downgrade to Hold.

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