Polycab India share price

Polycab India Hits Record High: A Deep Dive into Its Explosive Growth and Positive Outlook

Polycab India Breaks Records with Soaring Share Price and Bright Future

Polycab India’s shares have hit an all-time high, climbing to a remarkable ₹7,350 per share during Tuesday’s intra-day trade on the Bombay Stock Exchange (BSE). This 6% rally reflects the positive market outlook for India’s leading manufacturer of wires and cables (W&C). The share price also broke its previous high of ₹7,330, reached on June 25, 2024. In just eight trading days, Polycab stock has surged 13%, showcasing the company’s steady momentum.

A Powerhouse in the Wires & Cables Industry

Polycab India has long established itself as the largest manufacturer of wires and cables in India, and it’s also one of the fastest-growing players in the fast-moving electronic goods (FMEG) sector. With a consolidated turnover of ₹18,039 crore in FY24, the company’s financials speak to its success.

Record-Breaking First Quarter for FY25

In the April to June 2024 quarter (Q1FY25), Polycab India’s revenues jumped by an impressive 21% year-on-year (Y-o-Y) to ₹4,698 crore, marking its highest-ever first-quarter revenue. This growth was powered by a steady performance in the W&C business, alongside strong growth in engineering, procurement, and construction (EPC), and a seasonally robust FMEG segment. However, while the revenue growth was strong, the company’s earnings before interest, tax, depreciation, and amortization (Ebitda) margin faced a contraction.

What’s Behind the Margin Contraction?

Despite the positive revenue numbers, Ebitda margins dipped by 170 basis points (bps), coming in at 12.4%. This margin squeeze was primarily due to a shift in the business mix. The contribution from Polycab’s higher-margin International and domestic distribution business declined, while the lower-margin EPC business saw an increase. As a result, the overall margin suffered slightly.

Credit Rating Outlook: From Negative to Positive

In July 2024, India Ratings and Research (India-Ra) revised its outlook on Polycab India’s credit rating from “on watch with negative implication” to “positive.” This upgrade came after the resolution of a rating watch initiated by the Income Tax Department, which had conducted a search at various Polycab locations in December 2023. The good news is that no tax demand notices or orders emerged from the investigation, and there was no impact on the company’s financial or operational performance.

Bright Future Ahead: Optimism in the W&C Segment

The improved rating outlook from India-Ra reflects the belief that Polycab’s strong scale and focus on the W&C business, combined with its B2C efforts, will help offset the lower-margin FMEG business over the next 18-24 months. Analysts expect the company to maintain healthy Ebitda margins and achieve a strong return on capital employed of around 20% over FY25 to FY27.

Polycab’s W&C segment is witnessing strong demand, thanks to the Indian government’s infrastructure development push and the resurgence of private investments. The company is strategically positioned to capitalize on these tailwinds, and management is optimistic about future growth.

Global and Domestic Analysts Bullish on Polycab

In August, global brokerage UBS initiated coverage on Polycab India with a ‘Buy’ rating and set a target price of ₹8,550 per share. UBS is bullish on the company due to its better-than-expected domestic volume growth, market share gains, and a solid distribution-led export model. UBS also highlighted that with a presence in 40% of the domestic electrification market, Polycab is well-positioned to benefit from the multi-year cyclical growth in India’s W&C segment, particularly in low-voltage infrastructure projects.

Conclusion:

Polycab India’s record-high share price reflects more than just market optimism—it’s a testament to the company’s strategic focus, growth in key sectors, and strong execution in both the W&C and FMEG businesses. Polycab India share price, With robust demand driven by government infrastructure initiatives and private investments, Polycab is poised for sustained success. Analysts are bullish on its future, with global brokerage firms like UBS setting ambitious targets. As Polycab continues to lead India’s electrification market, its growth story is just beginning.

FAQs:

1.Why did Polycab India’s share price hit a record high?

A. Polycab’s shares surged due to positive market sentiment, strong growth in its core W&C and FMEG businesses, and optimistic analyst outlooks.

2.What is Polycab India’s business focus?

A. Polycab India is the largest manufacturer of wires and cables in India, with a growing presence in the fast-moving electronic goods (FMEG) sector.

3.What was Polycab India’s revenue for Q1FY25?

A. The company recorded its highest-ever first-quarter revenue of ₹4,698 crore, a 21% year-on-year growth.

4.Why did Polycab’s Ebitda margins contract in Q1FY25?

A. The margin contraction was due to a shift in the business mix towards lower-margin EPC operations and a decline in higher-margin international business.

5.What led India Ratings to improve its credit rating outlook on Polycab?

A. India-Ra revised the outlook to “positive” after no negative findings emerged from an Income Tax search in December 2023, and Polycab’s financial performance remained unaffected.

6.What growth does Polycab see in its Wires and Cables (W&C) segment?

A. Strong demand in the W&C segment is driven by government infrastructure projects and a rebound in private investments, which could boost future growth.

7.What is UBS’s target price for Polycab India shares?

A. UBS has given a ‘Buy’ rating with a target price of ₹8,550 per share, based on positive domestic growth and export opportunities.

8.What sectors does Polycab India’s FMEG business serve?

A. Polycab’s FMEG segment serves sectors like home appliances, lighting, and consumer electronics, contributing to the company’s diverse portfolio.

9.How is Polycab leveraging government infrastructure initiatives?

A. Polycab is well-positioned to benefit from India’s focus on low-voltage infrastructure projects, a key driver for its W&C business.

10.What are Polycab’s long-term financial expectations?

A. Analysts expect Polycab to maintain strong Ebitda margins and a return on capital employed of around 20% over FY25 to FY27, driven by growth in the W&C segment.

Polycab India share price

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