Broker’s call: Polycab India (Reduce)

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Target: ₹5,595

CMP: ₹7,340.35

Revenue from operations of Polycab witnessed a robust growth of 20.8 per cent to ₹4698.03 crore in Q1-FY25 from ₹3,889.38 crore in the corresponding quarter of previous year. The contribution to revenue from wires and cables business was 84 per cent at ₹3942.13 crore as compared to 90.8 per cent in Q1-FY24.

Given the volatility in commodity prices during the quarter and turn down in government ordering due to elections, the wires and cables segment grew by only 11.6 per cent y-o-y.

The stock currently trades at 50.9x FY25 EPS of ₹136.78 and 43.5x FY26e EPS of ₹159.85. With stability in raw material prices and government support in the form of increased capital expenditure, the sales in wires and cables business is bound to improve in the coming quarters. Though, there has been massive growth in its revenues, the FMEG segment is still incurring loss.

Along with developing new products, the company plans to scale up by efficiently by utilising its manufacturing plants. This would improve the operating leverage that would have galvanising effect on the bottom line.

Balancing odds, we assign ‘reduce’ rating on the stock with revised target price of ₹5,595 (previous target: ₹3,984) based on 35x FY26 EPS of ₹159.85 over a period of 9-12 months.