Polycab India hits highest level since listing, climbs 10% in two days

Shares of Polycab India were trading higher for the fourth straight day on Wednesday, up 5 per cent at Rs 737, surging 10 per cent in the past two days on the BSE on expectation of improved earnings growth going forward.

The stock of the largest manufacturer of Wires & Cables (W&C) was trading at its highest level since listing on April 16, 2019. It has appreciated 37 per cent against issue price of Rs 538 per share.

Polycab India is scheduled to announce July-September quarter (Q2FY20) results on October 23, 2019.

The company plans to strengthen its leadership position in the wires & cables market in India by increasing the share of business with existing customers, winning new customer contracts, geographical expansion and development of innovative and customised products.

Analysts at SMC Institutional Equities have initiated coverage on the stock with ‘buy’ rating with a 12-month target price of Rs 874 per share.

In the coming years, the brokerage firm expects reduction in finance costs on the back of lower debt and reduction in tax rates post new corporate taxes should expand the net profit margins to 6.7/7.2 per cent in FY20E/FY21E, respectively. Hence, it expects Polycab India’s net profit to grow at CAGR of 20 per cent over FY19-FY21E to Rs 726 crore.

“In last five years, the company has successfully forayed into Fast Moving Electric Goods (FMEG) segment. Ability to deliver healthy growth on the back of diversified product portfolio, extensive dealer network, improving brand image and focusing on maintaining cash flows are the key strength of the company. We reckon with huge opportunities in offering by industry, steady performance in W&C segment and improving profitability in FMEG segment, Polycab should be an ideal stock in an investor’s portfolio,” the brokerage firm said in a report.

“We like Polycab India for its normalised revenue, earnings growth with stable margin. However, future demand of W&C coupled with profitable growth in the FMEG segment would be key monitorables and re-rating factor for the company, going forward,” analysts at ICICI Securities said in a company update.

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