On Monday, Polycab India (NS:POLC) Limited (POLYCAB:IN) saw its price target increased by Citi from INR8,400.00 to INR8,600.00, while the firm retained a Buy rating on the stock.
Citi's analysis highlights management's insights on various aspects of Polycab's business, including the impact of competition on the Wires & Cables segment margins, expected demand growth in the second half of the year, and the anticipated trend of higher margins in the latter half compared to the first.
The company's management expects the demand to pick up further in the second half of the year and believes that margins during this period tend to be higher than in the first half. They anticipate this trend to continue.
Additionally, they forecast a similar quarterly run rate in the Others/EPC division for the next two years, supported by a strong RDSS order book with a backlog of Rs48 billion. Furthermore, Polycab plans to invest Rs10-12 billion annually in capital expenditures for the next two to three years.
While the EPC segment's contribution to revenue is expected to remain high, a revival in exports is projected to help recover margins. Based on these factors, Citi has increased its FY25-27E revenue estimates for Polycab by 4-5%, acknowledging the company's growth exceeding expectations.
However, the firm has slightly reduced its EPS estimates by 1-5%, accounting for lower margins. The target price revision reflects a roll-forward of the target P/E multiple of 52x to September 2026E from June 2026E.
Polycab, according to Citi, remains their top pick within the Consumer Durable/Electrical sector, indicating a positive outlook on the company's performance and market position.
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