Polycab India: Recent underperformance offers buying opportunity?

Shares of Polycab India Ltd offer a buying opportunity after the recent underperformance, according to global brokerage Jefferies following the launch of UltraVolt by Ultratech Cement. The wires and cables stock has slipped nearly 10% following the launch, marking its fourth new business foray in the past three years.

Jefferies maintained a buy call on the cables and wires stock with a price target of Rs 11,100.

The brokerage considers the recent 10% 5-day drop (following UltraTech's Ultravolt launch) a buying opportunity. Suggesting to buy the fall, Jefferies said Polycab is 70-75% cables and UltraTech is more wires-focused. There is limited room for price wars since industry Net Profit Margin is only 5-7%.

Kotak Securities too upgraded the stock to REDUCE from SELL following the recent correction in the stock. It assigned a price target of Rs 8,400 against a target price of Rs 8,700. The brokerage upgraded its stance on the stock following its underperformance against peers. The brokerage sees Ultravolt as a credible threat to incumbent wires players.
 
On Thursday (September 3) last week, The Aditya Birla Group said it has entered the wires and cables market with the launch of Ultravolt, marking its fourth new business foray in the past three years.

This is a significant new announcement (implies aggressive posturing in terms of capacity additions, portfolio and distribution expansion) and could likely drive interim de-rating for the C&W industry, said Nuvama.

The new cables and wires brand housed under UltraTech Cement Limited plans to reach over 100,000 retailers, while leveraging more than 5,000 UltraTech Building Solutions (UBS) outlets to further expand product availability.