This stock has zoomed 1172% against IPO price in 5 yrs; m-cap hits Rs 1 trn

At 12:02 PM; Polycab India was trading 4% higher at Rs 6,736.80 on the BSE

Polycab India joined the elite club of companies having market capitalisation (market cap) of Rs 1 trillion, as the stock price of the wires and cables (W&C) maker hit a new high of Rs 6,843.80, rallying 5 per cent on the BSE in Tuesday’s intra-day trade.

In the past eight trading days, since May 10, the stock surged 18 per cent after the company said it reported its highest ever yearly and quarterly revenue and profitability in March 2024.  The stock of fast moving electronic goods (FMEG) company has recovered 80 per cent from its low of Rs 3,812.35, hit on January 11, 2024.

 

With sharp recovery in stock price, the market cap of Polycab India hit Rs 1 trillion for the first time today. At 12:02 PM; the stock was trading 4 per cent higher at Rs 6,736.80 on the BSE. In comparison, the S&P BSE Sensex was up 0.07 per cent at 74,056.

Polycab India zoomed nearly 13 times or 1,172 per cent against its issue price of Rs 538 per share. The company made its stock market debut on April 16, 2019.

The company is India’s largest manufacturer of W&C and one of the fastest growing FMEG companies with a consolidated turnover of Rs 18,039 crore in FY24.

In Q4FY24, Polycab’s revenue grew by 29 per cent year-on-year (YoY) at Rs 5,592 crore on the back of strong volume growth in W&C business. Profitability for the quarter crossed the threshold of Rs 500 crore for the first-time ever, as the company posted a profit after tax of Rs 553.5 crore in Q4FY24, a growth of 29 per cent YoY.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin for the quarter improved by around 50 bps sequentially to 13.6 per cent, on account of better operating leverage and lower A&P spends. The margin, however, was down by 40 bps from 14.0 per cent in Q4FY23.

Management believes that the company’s market share stands at around 25-26 per cent of the domestic organized C&W market (vs. 22-24 per cent in FY23). Rural demand has improved, leading to higher sales for FMEG products, which, along with an increase in private sector capex, should boost growth.

Growth was largely backed by the cable business on the back of government and private capex and uptick in real estate. The company expects sustained volume growth in domestic C&W business on the back of strong demand environment, supported by government's continuous focus on infrastructure development and pickup in private capital expenditure. Accordingly, Polycab is expected to achieve Rs 20,000 crore revenues sooner than targeted by FY26E under Project LEAP.

Analysts at Prabhudas Lilladher expect revenue, EBITDA, and PAT CAGR of 17.9 per cent, 17.4 per cent and 16.6 per cent, respectively over FY24-26E. This will be led by a strong domestic demand environment supported by government measures and revival in private capex and expected improvement in international business. FMEG segment reported impressive growth on the back of a strong season, expected to continue in coming years, the brokerage firm said. It gave a ‘buy’ rating on the stock with a target price of Rs 7,086 per share.

Motilal Oswal Financial Services also reiterated its 'Buy' rating on Polycab India with a target price of Rs 7,850 (premised on 50x FY26E EPS). The brokerage firm said it likes the company due to its strong performance in the cables and wires segment, where it has a leadership position as well as strong margin delivery.