Polycab shares: Can Q1 earnings trigger a bull run in the FMEG stock?

Shares of Polycab India are heading toward record high amid euphoria around the market leader's Q1 earnings. The multibagger wire stock reached a record high of Rs 7,607.15 on October 15, 2024.  The wire and cables stock was trading in the green in the current session. It rose 1.50% to Rs 7057 in the afternoon session on Monday. Market cap of the firm stood at Rs 1.05 lakh crore. 

The multibagger stock has gained 215% three years and risen 727% in five years. 

Total 0.24 lakh shares of the firm changed hands amounting to a turnover of Rs 16.42 crore on BSE. 

The Q1 earnings announced last week, beat earnings estimates, which prompted brokerages to be 
bullish on the FMEG stock.  

YES Securities believes the stock should be bought on every correction.

It has an ADD rating on the stock with a price target of Rs 8,070 valuing the company at 40x. 

Commenting on the earnings, YES Securities said Polycab beat revenue estimates by 5.5% as wires and cables growth witnesses sustained demand momentum across core sectors in both retail and institutional channels FMEG business maintained strong growth momentum led by significant growth in solar inverter and steady demand across other product categories. 

EBITDA margin of the market leader came in at 14.5%, ahead of estimates. The margins show was led by a favourable mix skewed towards cables and stable copper prices that enabled selective pricing revisions. Additionally, losses in the FMEG segment has reported positive margins. 

The company maintained its long-term guidance of growing Domestic W&C revenue at 1.5 times to that of industry growth and FMEG growth to 1.5x-2x of the industry with EBITDA margin of 10%. 

The brokerage expects FMEG segment to pose double digit growth with positive margins on sustainable basis as re-structuring is behind. Polycab is expected to deliver FY25-27E Revenue/EBITDA/PAT CAGR of 20%/21%/22% respectively. 

Anand Rathi has a price target of Rs 7,948 with a buy rating on the Polycab stock. 

Premiumization and a standout quarter for solar products strengthened the FMEG performance. Polycab is well-set to capitalise on structural demand tailwinds, focusing on domestic markets and scaling up exports, said Anand Rathi. 

The brokerage expects the company to deliver an industry-leading performance. 

"Hence, model 18%/22% revenue/net income CAGRs over FY25-27. At the CMP, the stock trades at 43x/35x FY26e/27e EPS of Rs161/199. We value the stock at 40x FY27e EPS of Rs199, maintaining our Buy rating with a higher TP of Rs 7,948, said Anand Rathi 

The brokerage cited persistent slowdown in government infra spend, especially given the company’s huge investment in capacity and branding, sharp commodity-price volatility and increasing competitive intensity as major risks to its assumptions. 

Nuvama has maintained its BUY call on the stock. 

"We reckon Polycab shall sustain its industry-leading C&W growth/margins. We are increasing EPS by 3–7% and reckon FY25–28 revenue/EBITDA/PAT growth of 19%/20%/20%. We value the stock at 40 times, yielding a price target of Rs 8,200 (versus Rs 7,950 earlier)," said Nuvama