Hold Polycab India; target of Rs 2342: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Polycab India

We cut our FY22 earnings by 13.4% given 1) RM volatility led margin pressure and 2) focus on topline growth and market share gains in the near term. However, thereafter, we expect margins to recover gradually and remain structurally positive on longer term prospects given 1) sustained increase in B2C mix with focus on premiumization 2) pick up in infrastructure/ renovation/ construction activities 3) implementation of Project Leap (Targeting Rs200bn revenue; margin improvement; GTM expansion by FY26) 4) gains from consumer shift from unorganized to organized sector. We estimate Sales/ PAT CAGR of 21.8%/ 22.4% over FY21-24E.

Outlook

We value the stock on SOTP basis and arrive at a target price of Rs2,342 (derived PE of 24.6x FY24 EPS; W&C/ FMEG valued at 25x/ 30x). However, given the sharp re-rating in the past 12 months’ we expect returns to be back ended. Maintain Hold.

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