Up 114.16% In 1 Year! Multibagger Electricals Stock Surges Over 9%, Sharekhan Initiates Buy

The shares of Polycab India Ltd. soars 9.42% today, making a remarkable 28.60% surge in 1 week. It hits a new high of Rs 4.848 per share. Brokerage firm Sharekhan initiates a Buy on Polycab India Ltd. with a target price of Rs 4970 per share. The stock is likely to give a decent return of 6% if purchased at the current market price.

Polycab India is an electrical sector large-cap company. The market cap of the company is Rs 70,685.34 Crore.

The growth spark gets bigger and better

According to Sharekhan, Polycab India Limited's (Polycab) Q1FY2024 results exceeded our and street expectations on all fronts. The company's revenue grew by ~42% y-o-y to Rs. 3,889 crore (vs. our estimate of Rs. 3,175 crore). Growth was primarily led by ~46% y-o-y growth in cables and wires (C&W) (~88% of the total revenue). However, FMEG sales grew at a slow pace of 2% y-o-y, while the others (EPC) segment's sales jumped by ~53% y-o-y. Operating profit grew by ~76% y-o-y to Rs. 549 crore and OPM improved by 274bps y-o-y to 14.1% (vs. our estimate of 12.3%) due to judicious price revisions, operating leverage, and favorable business mix. Adjusted net profit grew by ~82% y-o-y to ~Rs. 399 crore (vs. our estimate of Rs. 273 crore), driven by strong operating performance and supported by a 44% y-o-y increase in other income. EBIT margin in the C&W segment (adjusting for inter-segment revenue) jumped to 15.1% (vs. 11.7% in Q1FY2023), while FMEG continued to report loss (~Rs. 6 crore) at the EBIT level.

Valuation - Retain Buy with a revised PT of Rs. 4,970

According to Sharekhan, Polycab's Q1FY2024 performance has been commendable on all fronts and the company has consolidated its leading position in the C&W industry. Going forward, a comprehensive product portfolio, growth and increasing share of the B2C business, continued demand momentum in the B2B segment, scaling up the FMEG business, and exports are key growth drivers. Moreover, margin improvement due to operating leverage and a favourable product mix would continue to drive profitability.

"We expect the company will revise its revenue guidance (Rs. 20,000 crore by FY2026) upwards, given the strong demand scenario and various growth levers. We envisage a 19.5%/~24% revenue/PAT CAGR over FY2023-FY2025E. After the recent run up, the stock trades at ~33x its FY2025E EPS," the brokerage said.

It added, "We believe the company has an upside potential, as it is well poised to leverage the capex upcycle, given its market leadership and expansion plans. Hence, we upgrade our target multiple and maintain a Buy rating with a revised PT of Rs. 4,970 based on FY2025E EPS."

Stock Movement

The last traded share price of Polycab India is Rs 4,715.10 per share, up 9.42% from its previous close. The stock hit a new 52-week high of Rs 4,848 per share today, while it hit a 52-week low of Rs 2,194 per share on July 20, 2023, respectively.

The shares gained 23.60% in 1 week, and 33.14% in 1 month, respectively. It has given 50.65% positive return in 3 months and 70.80% positive return in 6 months, respectively. It gained 114.46% multibagger return in 1 year. In 2 years, it gave 136.66% positive return, while in 3 years, it gave 459.76% positive return.

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. 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 consult with certified experts before making any investment decision.