Polycab India rallies 8% to hit new high, zooms 65% against issue price

The company's net profit more-than-doubled to Rs 194 crore in September quarter (Q2FY20), on the back of strong revenue growth.

Polycab India rallies 8% to hit new high; zooms 65% against issue price

Shares of Polycab India continued their upward march, hitting a new high of Rs 889, up 8 per cent in the intra-day deals on Wednesday. The stock has surged 24 per cent in the past two weeks, after reporting a healthy September quarter results. In comparison, the S&P BSE Sensex has gained 4 per cent during the same period.

Polycab India was trading at its highest level since listing on April 16, 2019. With today’s rally, the share price of the company zoomed 65 per cent against its issue price of Rs 538 per share.

Polycab India is engaged in the business of manufacturing and selling wires and cables (W&C) and fast moving electrical goods (FMEG) under the “POLYCAB” brand.

The company's net profit more-than-doubled to Rs 194 crore in September quarter (Q2FY20), on the back of strong revenue growth. It had logged profit of Rs 90 crore in the year-ago quarter. The bottom-line got an additional boost on the back of lower tax rates due to re-measuring of deferred tax assets/liabilities.

The company’s revenue during the quarter grew 24 per cent year-on-year (y-o-y) to Rs 2,242 crore driven by strong growth across segments. The wires and cables business grew 20 per cent to Rs 1,881 crore, while the FMEG business grew 42 per cent to Rs 196 crore in Q2FY20. EBITDA (earnings before interest, tax, depreciation and amortisation) margin improved to 12.1 per cent from 11.9 per cent in the previous year quarter.

Going ahead with a pickup in the industrial sector, revival of capex and increase in consumer spend can provide healthy traction to the company which can enable the company to fetch higher multiple, according to analysts at SMC Institutional Equities.

The brokerage firm maintains positive stance on the company, while revising the rating on the stock to HOLD from BUY largely due to sharp surge in the stock price, and advised investors to get into the stock at lower levels again.

Polycab has maintained their annual capex guidance of Rs 250 crore for FY20-FY21. However post new tax rates, the company may deploy additional cash for more capex for which more clarity can be expected in the coming quarter, it added.

Meanwhile, foreign portfolio investors (FPIs) have increased their stake in Polycab India by more than 1 percentage points since listing. FPIs holding in the company rose to 3.75 per cent in September quarter from 3.33 per cent at the end of June quarter. They held 2.49 per cent stake as on April 15, 2019.

At 11:27 am, the stock was trading 6 per cent higher at Rs 878 on the BSE, as compared to a 0.51 per cent rise in the S&P BSE Sensex. A combined 433,067 shares changed hands on the counter on the BSE and NSE so far.