Polycab India Ltd.'s earnings estimates and price targets were raised by analysts for the current fiscal after its fourth-quarter profit beat analysts' estimates.
The company's net profit rose 32% year-on-year to Rs 428.42 crore for the quarter ended March, according to a stock exchange filing on May 12, beating the Bloomberg estimate of Rs 382.08 crore. Revenue from operations rose 9% to Rs 4,323.68 crore, compared to a Bloomberg estimate of Rs 4,329.76 crore.
"We forecast operating margin to improve from 13.1% in fiscal 2023 to 14% by fiscal 2025, led by better operating leverage and improvement in FMEG margins," said Jefferies in a May 15 note. It views Polycab as a beneficiary of infrastructure, capex, and the housing revival and raised FY24–26 earnings per share by 2–4%.
Nuvama Institutional Equities expects double-digit volume growth for the company in the next two to three years.
Polycab India Q4 Results (Consolidated YoY)
Revenue from operations rose 9% to Rs 4,323.68 crore. (Bloomberg estimate: Rs 4,329.76 crore)
Ebitda rose to Rs 609.54 crore from Rs 476.34 crore. (Bloomberg estimate: Rs 535.49 crore.)
Ebitda margin stood at 14.1% versus 12%. (Bloomberg estimate: 13.09%)
Net profit rose 32% to Rs 428.42 crore. (Bloomberg estimate: Rs 382.08 crore)
Shares of the company rose 1.09% to close at Rs 3,418 apiece, as compared with a 0.61% decline in the benchmark Nifty 50.
Of the 26 analysts tracking the company, 12 maintain a 'buy,' six recommend a 'hold,' and one suggests a 'sell,' while of the remaining seven analysts, four remain neutral between 'buy' and 'hold,' and three are neutral between 'hold' and 'sell', according to Cogencis.
Here's what analysts are saying:
Jefferies
Maintains 'buy' and raises the target price to Rs 4,290 from Rs 3,630, implying an upside of 27%.
Says Polycab is a key pick in small and midcaps.
B2B demand is strong, led by private capex and government measures, driving more than 21% volume growth in cables and wires in fiscal 2023.
Views Polycab as a beneficiary of infrastructure, capex, and housing revival
Raises FY24–26 earnings per share by 2–4%.
Expects fiscal 2023 and 2026 sales and profit after tax CAGRs of more than 15% and 22%, respectively, driven by higher volumes.
Forecasts operating margins to improve from 13.1% in fiscal 2023 to 14% by fiscal 2025, led by better operating leverage and improvements in fast-moving electric goods margins.
Marks subdued traction in fast-moving electric goods, the slowdown in capex and infrastructure, and excess copper volatility as key risks.
Nuvama Institutional Equities
Maintain 'buy' and raise the target price to Rs 4,000 from Rs 3,200.
Strong fiscal 2023 and demand momentum have led to 11% and 14% earnings per share upgrades for fiscal 2024 and 2025, respectively.
Polycab’s Q4FY23 earnings beat house and street expectations significantly, reaffirming strong growth, especially that which cables are witnessing.
Says margin improvement despite higher cable growth (lower margins) is a critical achievement.
Robust private capex should keep cables’ demand strong, and key players should benefit.
Sees double-volume growth for the next two to three years.
Says that focusing on faster growth and higher-margin international business will add to the growth delta.
B2C push (wires + FMEG) should uplift margins.
Fast-moving electric goods, currently with EBIT losses, to turn positive in fiscal 2025.
Says current discretionary demand is weak, but the second half of fiscal 2024 may benefit from the low base of fiscal 2023, leading to better margins.
Management guides for a Rs 200 billion topline by fiscal 2026 seem conservative; hence, the possibility of disappointment is very low.
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