Polycab India Ltd. share price target

half in FY21. Polycab's working capital days has significantly improved in this quarter at 37 days from 60 days in previous quarter. The company's ROCE has remained stable at c.30.6% in this quarter while the Net Cash doubled to over 1333.5 crs as of December, 2020. We maintain our...

Polycab Evolving into a formidable FMEG player ............................................... 4 Story in charts ........................................................................................................ 5 FMEG Premium positioning with focus on large categories ................................ 6 FMEG CAGR of 28.8% over FY21-23 to improve B2C mix ............................... 6 FMEG margins to improve by 600bps over FY20-23E ................................... 8 Fans (40-45% of FMEG sales): Increasing premium offerings ......................... 10 Lighting (20-25% of FMEG sales): Innovation remains a key to success ......... 11 Switches & Switchgears (15% of FMEG sales): Immense growth potential ..... 12...

We retain Buy on Polycab India Limited (Polycab) with a revised PT of Rs. 1,200, given the improvement in demand in underlying user-industries. Strong traction seen in new launches and sales in pan-India residential market is expected to drive the company's housing wires and FMEG segments. Multiple price hike undertaken by the company led by a rise in copper prices to drive C&W; revenues along with underlying healthy demand. Copper volatility is a natural hedge unaffecting margin profile. The company to deepen its presence in semi-urban and rural markets to drive FMEG...

Strong distribution reach across the country with 3400+ dealers. Growing market share in cables & wires business Strong market share gains opportunity due to shift from...

Good Inroads in the FMEG segment With a highly diversified product mix, Cables & Wires accounts for 84-85% of total revenues. It is a market leader with more than 12% market share in the overall wires & cables market and more than 18% market share in the organized market. Over the last five years, Polycab has grown its revenue at a CAGR of 14% outpacing the overall industry growth of ~11%. The company has been improving its mix over the last few years from a relatively commoditized cable and wire business to making inroads in the FMEG (Fast Moving Electrical Goods) segment, which...

Gross margin during the period increased ~180 bps YoY led by better product mix. In addition to this, significant steps to rationalise fixed cost like lower variable pays & incentives and other costs help drive overall EBITDA margin up by 266 bps YoY at 14.8% in Q2FY21. We believe some costs (like travelling, advertising, etc) will get restored with normalisation in business...

Polycab reported stronger than expected numbers led by healthy revival in domesticB2Csegmentandexports.C&W;segmentrevenuesdeclined5%yoy;the decline was lowerthanexpected on account of double digit growth in housing wiresand47%yoygrowthinexports.However,domesticB2Bsegmentdeclined 3040%yoyduetoslowerexecutionininfrastructureprojects.ExcludingDangote revenues (Rs440mn), exports jumped 400% yoy led by increasing presence in exportmarket.Recoveryinrevenuesisalsoaidedbythestrongincreaseincopper prices. FMEG growth of 24.7% yoy was quite higher than our expectations....

We arrive at a target price of Rs 1015 (vs. Rs 915 earlier) valuing Polycab at 18X FY22E EPS of Rs 56.4. Maintain BUY.

Revenues came in at Rs21.1bn, down by 6% YoY, while EBITDA at Rs3.1bn was up 15% YoY but PAT was up by 14% YoY at Rs2.2bn ahead of estimates as outlined in Exhibit 1. CCC days was flat compared to Q4FY20 at 85 days in Q2FY21, but inventory was higher at 96 days compared to 80 days in March 2020 quarter. Cash generated from operations in H1 was Rs7.8bn with a net C&CE; of Rs6.8bn Wires & Cables margins came in higher by 340bps YoY at 13.9% while FMEG margins saw an exponential increase of 470bps YoY to 8.0% in...

We recommend Buy on Polycab India Limited (Polycab) with a PT of Rs. 1,060, given healthy net earnings growth outlook over FY2021E-FY2023E along with attractive valuation. The company reported strong outperformance on OPM and net profit along with double digit y-o-y growth in FMEG and strong improvement in EBIT. Adjusting for tax write back in Q2FY2020, net profit would have risen by 31% y-o-y. Expect H2 to be better than H1 as FMEG continues to witness double-digit growth and C&W; sees improvement with rising infrastructure investments. We expect margins to be aided by various cost initiatives undertaken....