Polycab India shares rise 3% after UBS initiates 'buy'; check out target

Polycab India stock price rise on UBS report: Shares of Polycab India climbed over 3 per cent in the intraday deals on Tuesday, August 20. The rise came after global brokerage UBS initiated coverage with 'Buy' rating. UBS gave a target of Rs 8,550 apiece on PolyCab India shares, which translates to a 28.8 per cent upside from the current levels.

At around 10:05 AM on BSE, shares of Polycab India were up 1.25 per cent or Rs 82.75 at Rs 6722.05 apiece. The market capitalisation (market-cap) of the company at around the same time stood at a tad over Rs 1 trillion.

Why buy Polycab India stock?

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 cable and wire (C&W) segment, on robust domestic low-voltage infrastructure creation.

Also, as per UBS, the company has a robust competitive positioning with a significant lead in manufacturing capacity and the highest market share. Not only that but its strong business-to-consumer (B2C) network, and significant business-to-business (B2B) scale also give a competitive edge.

Can Polycab India increase its TAM revenue?

Polycab India, UBS said, has the second-largest total addressable market (TAM), next to Havells which can be expanded as a low-single-digit share in the fast-moving electrical goods (FMEG) segment (two to three per cent in FY24) offers a significant opportunity to scale up.

TAM is the total revenue a product or service could generate if it had 100 per cent of the market share in a specific industry or market.

Additionally, the brokerage believes, presents inorganic growth potential in adjacent FMEG categories can position the company among the top four-five in fans and small appliances, among others.

Polycab's strategy, UBS believes, in the current growth-levered environment provides a significant edge, as evidenced by the company tracking ahead of its Rs 20,000 crore top-line target by FY26.

The company has already invested in capacities well ahead of peers with its robust distribution and B2B strategy, with the widest stock-keeping units (SKU). This makes a credible case for the company to outgrow the industry, UBS said, and increase its share by an incremental 200 basis points (bps) over the next two years.

In the last one year, Polycab India shares have gained over 39 per cent against Nifty 50's rise of 27.2 per cent.