Polycab India - High Infrastructural Spends To Drive Growth: Nirmal Bang

Nirmal Bang Report

We hosted the management of Polycab India Ltd. They stated that growth in renewable energy capacities and infrastructure development is expected to boost demand for cables (domestic plus exports) while continued uptick in residential real estate is expected to boost demand for wires in India.

Focus is on enhancing market presence through increased advertising and promotion spends. Polycab is targeting ~3-5% of B2C topline annually, with anticipated margin implications. A&P for 9M FY24 stood at ~2.2% of B2C topline.

Due to the ~8% catch-up in the stock price from our last published note (January 19, 2024), we downgrade Polycab to 'Accumulate' with a target price of Rs 5,255 (36 times price-to-earning on Dec-25E earnings per share).

While we remain structurally positive about the company’s long-term business prospects, we await clarity on the recent turn of events.

We will revert to our original multiple once we see a revival in fast moving electrical goods and derive adequate comfort on the recent events getting addressed to investors’ satisfaction.

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