ICICI Direct Places Buy Call On Multibagger Midcap Consumer Durable Stock, Sees Gains Up To 24%

ICICI Direct in its recently published report on Polycab India Limited suggests "buy" for 24% potential upside from its current level with a revised target price of Rs 3,300 per share. This mid-cap consumer durable sector stocks engaged in the electronics and electricals business. It has a market capitalisation of Rs 40,170,74 crore.

Polycab is the largest manufacturer of wire & cable in India. The company also entered the fast-moving electrical goods (FMEG) space in 2014 and has recorded a strong segment revenue CAGR of 32% in the last five years. Polycab is the market leader in the wire & cable business with an organised market share of 22-24%. In the FMEG segment, it is growing through new product launches and dealer addition across India. The company has ~4600 dealers, serving ~2 lakh retail outlets. Robust b/s with RoE, RoCE of 18%, 22%, respectively, (three-year average)

Stock Outlook & Returns

The Current market price (CMP) of Polycab is Rs 2,673 per share on NSE, trading 1.24% down. The 52-week low level of the stock is Rs 2,043.85 per share recorded on June 20, 2022, and the 52 week high level is Rs 2,862.50 per share recorded on October 19, 2022, respectively.

The shares in the past 1 week have surged by 4.32%, whereas, 2.4% in the past 1 month, respectively. Over the 3 months, it has given 22.14% positive return. It has given 17.08% positive return over the past 1 year. It gave 271.19% multibagger return in the 3 years. The stock made its debut on the stock exchange in April 2019. Since its listing, it has given a multibagger return of 308.79% to investors.

Q2FY23 Results

Strong performance led by the wire & cable business. Revenues were up ~11% YoY to ~Rs 3332 crore led by ~12% growth in the wire & cable segment. FMEG segment revenue de-grew ~11% YoY on a higher base and subdued rural demand. Gross margin increased ~418 bps YoY supported by better product mix, judicial price revisions and lower RM costs. That helped drive EBITDA margin up by ~309 bps YoY to ~13%. PAT up ~35% to | 271 crore YoY; tracking strong topline growth and EBITDA margin expansion.

ICICI Direct maintains buy with revise Target price of Rs 2,740 per share

Polycab's share price has grown by ~3.4x over the past two years (from ~Rs 804 in July 2020 to ~Rs 2740 levels in October 2022). "We maintain our BUY rating on the stock. We revise our target price to Rs 3300/share valuing the stock at 38x P/E on FY24E EPS," the brokerage has said.

Key triggers for future price performance

• Set a target to achieve Rs 20,000 crore revenues by FY26 (13% CAGR).
• Beneficiary of the government's plans to invest ~ Rs 111 lakh crore in FY20- 25 under its National Infrastructure Pipeline.
• Total ~1.7 crore new houses under PMAY, urbanisation and rising aspiration level will give a significant boost to demand for home appliances.
• Model revenue, earnings CAGR of ~12%, respectively, in FY22-24E.

Disclaimer

The stock has been picked from the brokerage report of ICICI DIrect. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.