Polycab India share price soars 6%, hits record high on positive outlook

Polycab India share surpassed its previous high of Rs 7,330 touched on June 25, 2024.

Polycab India share price: Shares of Polycab India hit a record high of Rs 7,350 per share, as they rallied 6 per cent on the BSE in Tuesday’s intra-day trade on positive outlook. The share of the fast moving electronic goods (FMEG) company surpassed its previous high of Rs 7,330 touched on June 25, 2024. In eight trading days, the scrip has surged 13 per cent.

Polycab India is India's largest manufacturer of wires & cables (W&C) and one of the fastest growing FMEG companies with a consolidated turnover of Rs 18,039 crore in FY24.

In April to June 2024 quarter (Q1FY25), the company’s revenues grew 21 per cent year-on-year (Y-o-Y) to Rs 4,698 crore, registering its highest ever first quarterly revenue, on the back of steady growth in W&C business, supported by strong growth in the engineering, procurement, and construction (EPC) business, and a seasonally robust performance in the FMEG business.

However, earnings before interest, tax, depreciation and amortisation (Ebitda) margins contracted by about 170 basis points (bps) to 12.4 per cent. The decrease in margin was driven by a shift in the business mix toward segments with lower margins – the contribution from higher margin International business and domestic distribution business declined, while that from lower margin EPC business inched up.

Meanwhile, in July 2024, the rating agency India Ratings and Research (India-Ra) improved the outlook on the company’s credit rating to “positive” from the earlier “on watch with negative implication”.

The resolution of Rating Watch with Negative Implications reflects no tax demand notice or any other order from the income tax department (I-T Department) regarding the search conducted by the department across various Polycab India’s locations in December 2023.

Furthermore, there was no impact of the search on Polycab’s financial or operational performance.  However, the agency will continue to closely monitor the outcome/progress of the same, Ind-Ra said in rating rationale.

The Positive Outlook reflects Ind-Ra’s expectation that PIL’s increasing scale with a continued focus on the W&C business and thrust on B2C segment will absorb the impact of the lower margin FMEG business over the next 18-24 months, and aid in maintaining Ebitda margins and a healthy return on capital employed of around 20 per cent over FY25-FY27.

The W&C segment is seeing strong demand, mainly due to the Indian government’s focus on infrastructure development and a rebound in private investments. This positive environment has led management to feel optimistic about growth in the coming years. As infrastructure projects increase, the segment is well-positioned to take advantage of these opportunities, suggesting a bright future for the company’s operations in this area, according to brokerage firm BOB Capital Markets.

Meanwhile, in August, global brokerage UBS initiated coverage on Polycab with a 'Buy' rating and gave a target of Rs 8,550 apiece.

UBS is bullish on Polycab India on the back of better-than-expected domestic volume growth, domestic market share gains, and a distribution-led export business model. Further, the brokerage believes that with a presence in 40 per cent of the domestic electrification market, Polycab stands to benefit from strong multi-year cyclical tailwinds in the W&C segment, on robust domestic low-voltage infrastructure creation.