Home / Markets / Mark To Market /  Polycab shares ride high on good Q4, market share gains

MUMBAI : The Polycab India Ltd stock has risen by more than 55% so far this year. The strong growth in the company’s wires and cables segment, fast-growing electrical goods (FMEG) portfolio and international business have led to increased investor interest. The March quarter performance is testimony to this, as revenues grew as high as 43% year-on-year (y-o-y).

Analysts at Yes Securities Ltd said revenue was 12% ahead of their estimate.

A healthy pick-up in infrastructure and industrial project activities meant wires and cables business grew 35% y-o-y to 2,488 crore in Q4FY21. Improving consumer sentiment and higher sales realizations helped too. The company said the business performance was broadly consistent across the distribution channel as well as the institutional business.

Strong gains
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Strong gains

The FMEG business grew 89% y-o-y to 347 crore in Q4FY21, on the back of healthy consumer demand, distribution and strong execution, leading to market share gains. Margins of the business rose too.

The impact of rising commodity prices as that of copper, aluminium etc. was visible on the operating performance. The company, though, was able to manage its margins with cost controls and price hikes.

Overall, Ebitda grew 40.1% y-o-y with an Ebitda margin of 13.9%, which was more or less the same as year-ago levels. Pricing actions, leverage benefits and cost-saving initiatives helped to maintain Ebitda margin despite the sharp contraction in gross margins, said analysts at Yes Securities.

Moving forward, growth prospects remain promising. The company continues to gain market share, and now commands a market share of 20-22% of the organized market, up from 18% two years ago, point out analysts. The institutional business too has seen a strong rebound. Though near-term uncertainties due to covid-led lockdowns may weigh, analysts expect good growth prospects in FY22.

The electrical gadgets/appliances business under FMEG is also making good progress. Analysts say the fan segment continues to pose healthy growth, while the lighting products business nearly doubled and the switch and switch gears business grew 2.5 times.

Though exports were softer, it was mainly due to the high base effect. The year-ago quarter had seen supplies for a large order. Further, a delay in projects and large constructions across the world also has a bearing.

Analysts at Yes Securities said the stock is currently trading at 23 times estimated FY23 earnings. Given the strength in the balance sheet, improvement in working capital and faster growth in B2C business, the stock should continue on its re-rating journey, they add.

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