Sharekhan Recommends To Buy This Equipment Stock For 20% Upside, Check Portfolio

Brokerage firm Sharekhan initiated a buy call for the stocks of POLY CAB, for a 19.52% return, in 1 year. The company's growth is anticipated to tread well with growth reviving in institutional business, while recent hiring in FMEG business from leading competitive firms can push sustaining a strong revenue growth in FMEG business.

Target Price

The Current Market Price (CMP) of POLY CAB, is Rs. 2,510. Sharekhan has estimated a Target Price for the stock at Rs. 3,000. The company is anticipated to give a 19.52% return, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 2,510
Target Price	Rs. 3,000
1 year returns	19.52%

 

Company performance

POLY CAB's FMEG segment saw 11% y-o-y growth, the EPC segment saw 11% y-o-y growth, and sales of wire and cables were up 38% y-o-y. Revenue from the wires and cable segment has seen a decent 9% CAGR during FY2017-FY2021 and FMEG grew by 33% CAGR during the same period. Further, the increasing market share of organized players, which grew from 61% in FY2014 to 66% in FY2018, is expected to touch 74% in FY2023E, which augurs well for the industry leader. Additionally, the Ryker business is divested at an EV of Rs. 3.23 billion with a pre-tax gain of Rs. 1.24 billion. Project leap remains on track with Rs. 20,000 crore revenue targets by FY26.

Comments by Sharekhan

Maintaining buy rating, Sharekhan mentioned, "Polycab is expected to benefit from government infrastructure investments, revival in housing demand and pick up in private Capex spending. The OPM is expected to improve with the impact of price hikes and operating leverage offset the increased input costs. The company builds a strong top management team in FMEG to drive the business. The consolidated revenues for Q3FY2022 rose 22.8% y-o-y led by strong growth in cables & wires (up 23.5% y-o-y) as cables registered better performance than wires. The institutional business bounced back sharply with 150% y-o-y growth in revenues with broad-based recovery seen across sectors."

About the company

POLYCAB manufactures and sells wires and cables and FMEGs besides executing a few EPC projects. The company has 25 manufacturing facilities, including two joint ventures with Techno and Trafigura, located across Gujarat, Maharashtra, Uttarakhand, and the union territory of Daman and Diu. POLYCAB strives to deliver customized and innovative products with speed and quality service. The company has entered into a multi-year agreement with Hindalco for sourcing copper.

Disclaimer

The above stock was picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

(Also read: ICICI Direct Initiates A Buy Call For This Stock For 17% Upside, In 1 Year, Improved Revenue)