Prabhudas Lilladher has given Hold recommendation for Polycab India with a target price of Rs. 2387 in its research report issued on Jan 21, 2022

Prabhudas Lilladher’s research report on Polycab India

We cut our FY22/FY23/FY24 earnings by 4.1%/ 5.1%/ 4.5% largely on account of 1) inflationary input cost environment led margin pressure and 2) impact of Ryker (Copper segment) divestment. Polycab remains optimistic on the demand scenario further buoyed by strong bounce back in the institutional segment and expects to exit FY22 with margins at 11%. Although FMEG margins were a disappointment as Polycab continues to restructure the vertical (management structure, GTM, product portfolio) under Project Leap, the management remains confident of attaining double digit margins by FY26. We continue to 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 and 3) implementation of Project Leap (Targeting Rs200bn revenue; margin improvement; GTM expansion by FY26). We estimate Sales/ PAT CAGR of 20.7%/ 22.4% over FY21-24E.

Outlook

We value the stock on SOTP basis and arrive at a target price of Rs2,387 (derived PE of 26.3x FY24 EPS; W&C/ FMEG valued at 26x/ 30x). However, given the sharp re-rating in the past 12 months’ we expect returns to be back ended. Maintain Hold.

More Info on Trent

At 15:44 hrs Polycab India was quoting at Rs 2,519.80, up Rs 31.90, or 1.28 percent.

It has touched an intraday high of Rs 2,580.00 and an intraday low of Rs 2,460.00.

It was trading with volumes of 13,166 shares, compared to its thirty day average of 28,628 shares, a decrease of -54.01 percent.

In the previous trading session, the share closed up 0.43 percent or Rs 10.55 at Rs 2,487.90.

The share touched its 52-week high Rs 2,770.85 and 52-week low Rs 1,145.60 on 18 January, 2022 and 28 January, 2021, respectively.

Currently, it is trading 9.06 percent below its 52-week high and 119.95 percent above its 52-week low.

Market capitalisation stands at Rs 37,644.02 crore.

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