This stock has tripled investor wealth in around 15 months; should you buy now?

Polycab India share price: Shares of the company have jumped 200% to Rs 1,739.75 as of June 7 from Rs 579.20 in March last year

This stock has tripled investor wealth in around 15 months; should you buy now?
Representative image (Pixabay)

Strong growth in the wires and cables segment and a robust Fast Moving Electrical Goods (FMEG) portfolio have managed to attract investors towards Polycab India on Dalal Street.

As a result, shares of the company have jumped 200% to Rs 1,739.75 as of June 7 from Rs 579.20 on March 24 last year. On the other hand, the benchmark BSE Sensex has gained 96% to an all-time closing high level of 52,328 during the same period.

Performance

For the latest quarter ended March 31, the company posted 31.55% YoY growth in net profit at Rs 281.44 crore against Rs 213.93 crore in the same period last year. On the other hand, the total income of the company increased by 40% YoY to Rs 3,064.79 crore.

According to ICICI Securities, Polycab India reported strong revenue growth in Q4FY21 led by 89% and 38% growth in the revenues of FMEG and wires and cables (W&C) segment, respectively. While a favourable base and healthy pick-up in infra spending drove revenue of the W&C segment, the FMEG segment revenue growth was driven by new product launches and dealer additions in new geographies.

On the expenses front, savings in employee and other costs helped negate the adverse impact of higher raw material prices and limited the fall in EBITDA margin by 25 basis points YoY.

What’s next?

Polycab has set a target to achieve Rs 20,000 crore revenues by FY26 (18% CAGR) through various strategic initiatives such as strengthening its B2C product portfolio and maintaining a leadership position in the B2B category. On the FMEG front, the company has set a target to expand dealers in the top 300 cities and grow revenues by 3 times in the next five years.

Should you invest now?

ICICI Securities has a ‘Buy’ call on Polycab India with a revised target price of Rs 2,025 (Rs 1,385 earlier). “We revise our revenue, PAT estimate downward by around 4% each in FY22 to factor in lockdown impact. We build in revenue, PAT CAGR of 18%, 16%, respectively, in FY21-23E considering a revival in government’s infra spending along with a focus on the profitable growth of FMEG business. We believe a strong brand and a healthy balance sheet would help it to attain its long term growth target,” the brokerage said.

YES Securities also has a ‘Buy’ call on Polycab India with a price target of Rs 2,012. “B2C business delivered strong growth with FMEG registering a growth of 89%, highest among peers. Wires, which is a B2C business has sustained its growth momentum delivering superior growth. Polycab now commands a market share of 20‐22% in wires and cables in the organised wires and cables market vs around 18% in FY19,” YES Securities said.

It further added that Polycab still trades at a significant discount to players like Havells, Crompton which should continue to narrow gradually.

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