*SMC Global Institutional Equities*
*POLYCAB Ltd*
Link to Report*
*Initiating Coverage*
*CMP: INR 705*
*Target Price: INR 874*
*Up Side: 24%*
*Rating: BUY*
*“Rewire your Portfolio!”*
*About the company:*
Polycab Ltd is the largest manufacturer of Wires & Cables (W&C) in India possessing a market share of 18% in organized sector & 12% market share overall. In last five years the company has successfully forayed into Fast Moving Electric Goods (FMEG) segment. Ability to deliver healthy growth on the back of diversified product portfolio, extensive dealer network, improving brand image and focusing on maintaining cash flows are the key strength of the company. We reckon with huge opportunities in offering by industry, steady performance in W&C segment and improving profitability in FMEG segment, Polycab should be an ideal stock in an investor’s portfolio. *We initiate coverage on the company with a “BUY” rating.*
*Key Investment Rationale:*
· Dominant market share in Wires & Cables (W&C) Industry:
· Marking its presence in highly competitive FMEG industry:
· Backward Integration, Extensive dealer distribution network, Strong brand image:
· Strong B/S, healthy cash flows and superior return ratios aids to investment rationale:
*Valuations & view:*
At the CMP the stock is trading at 13.7x its FY21E EPS. However, given the opportunity size and dominant position we feel Polycab is likely to see further re-rating. We have valued the company at 17X on FY21E EPS of INR 51.4 to arrive at a target price of INR 874 implying an upside of 24% from current levels. A material jump in revenue from FMEG segment can be another trigger for valuations to go up for the company.
*Research Analyst*
Siddharth Purohit
*Research Associate*
Udit Gajiwala