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

Nirmal Bang Report

We hosted Mr Chirayu Upadhyaya – Head of Investor Relations. He stated that growth in renewable energy capacities and infrastructure development are 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.

Overall, ~3-4% is the cost of wires and cables in a project. Optical fibre entails ~25% of the total project cost, and Power & Transmission ~15-20% (all excluding land cost).

Domestic cables posted Ebitda margins of 9-10%, Domestic Wires 15-16%, and export cables over15-16%.

We maintain Accumulate with a revised target price of Rs 6,150 (37 times PE on March-26E EPS). While we remain structurally positive about the company’s long-term business prospects, in the short term-

1. the steep rise in copper prices could keep both demand and margins under check; and

2. we also await clarity from the tax department.

We will revert to our original multiple once we see a revival in FMEG and derive adequate comfort on tax-related issues getting addressed. Nonetheless, we believe it is a long term compounder and therefore it should be accumulated at every dip.

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