Polycab Share Price Jumps by 10% After Strong Q4 Results; Brokers Stays Positive

Producer of wires, cables, and electrical appliances, Polycab India Ltd., posted impressive first-quarter results, leading to a surge in its share prices to unprecedented highs during the morning trading session. Polycab India shares continued their upward trajectory from the previous day, reaching a 5% increase in early trading.

In early trading, Polycab shares reached a 52-week peak of ₹6,468.90, driven by multiple analysts increasing their target prices for the cable wires manufacturer's stock. This optimism follows the company's fourth-quarter results, which surpassed CNBC-TV18's expectations, leading to predictions of a potential 28% surge in the stock price.

The stock has rallied robustly, seemingly recovering completely from the recent precipitous decline caused by IT raids at the company's premises in December 2023. In the last year, Polycab India shares have surged approximately 90%, outperforming the Nifty 50 index, which has risen by 22% during the same period.

Polycab India's net profit experienced a 29% surge, reaching ₹553 crore for the quarter ending in March, compared to ₹428 crore in the previous year's corresponding period. The company's operational revenue also saw a 29% increase, amounting to ₹5,592 crore, compared to ₹4,324 crore in the same quarter of the previous fiscal year. Following the release of a positive earnings report on May 10, Polycab's stock price rose by 8%. Although the firm's margin declined by 50 basis points year-on-year, its revenue and profit both witnessed a 30% increase. Additionally, the EBITDA, or earnings before interest, taxes, depreciation, and amortisation, rose by 25% during the quarter.

In Q424, the cables and wires segment experienced a 19% year-over-year increase in revenue, accompanied by a volume growth of 30-40%. This growth was driven by government and private capital expenditures, as well as an uptick in the real estate sector. Meanwhile, the fast-moving electronic goods (FMEG) division witnessed a 17% on-year revenue rise. However, profit was affected by impairment in the joint venture Techno Electromech and provisions made for aged inventory in lights and panels.

Nuvama Institutional Equities stated that the growth in cables and wires exceeded expectations, accompanied by a market share increase. The brokerage firm raised its target price from ₹6,139 to ₹7,280 per share, while retaining its ‘Buy’ rating.

Citi has increased its target price to ₹7,708, suggesting it anticipates a 25% potential increase in the stock value. The company highlights robust internal operations, a healthy cash influx, and effective management of working capital.

Motilal Oswal anticipates a 28% surge in Polycab shares, rising from the May 10 closing price to ₹7,850. The analyst, who has assigned a 'Buy' rating, expresses a liking for the company owing to its robust performance in the cables and wires sector, where it holds a leadership position and consistently delivers strong margins.

Jefferies, too, has raised its target price to ₹7,125, stating that the company posted a strong FY24, with 28% sales growth.

“Margins will be 12-13% EBITDA and growth will continue because demand is good. The government is spending a lot on infrastructure, electrification in villages and having Wi-Fi in every village. The construction line is growing as the industry is expanding in cement and steel plants,” Inder T Jaisinghani, Chairman and Managing Director, told CNBC-TV18 in a post-earnings chat.

He added that the firm is continuously expanding its product range and is adding to its CapEx. “We are going to put at least ₹700-800 to ₹1,000 crore every year now. We have made a plan for the coming three years, which will continue.”