Shares of Polycab India took a 5% dip on October 18, 2024, despite reporting solid Q2FY25 earnings in line with estimates. The company’s net profit rose by 3.6% YoY to ₹445.2 crore, and total income surged to ₹5,574.6 crore, marking a significant growth in its wires and cables (C&W) segment.
Q2 Snapshot: What’s Driving Growth? 🚀
- Domestic Cables & Wires (C&W): Polycab’s sales growth was fueled by a 28% rise in domestic C&W sales, its highest-ever Q2 sales.
- FMEG Segment: The Fast-Moving Electrical Goods (FMEG) division posted 18% growth in sales, although losses continue in this segment.
However, the stock’s drop is attributed to shrinking operating profit margins, influenced by increased competition and a shift in the product mix.
What Analysts Are Saying 🧐
Despite the recent dip, Jefferies and Nuvama have retained their ‘buy’ ratings on Polycab. Jefferies has set a target price of ₹8,315, while Nuvama has it pegged at ₹8,340, with both firms bullish on the company’s long-term prospects.
- Global Expansion: Polycab is increasingly focusing on the global C&W market, which Nuvama believes will fuel the company’s next growth phase. Currently, exports account for 10% of C&W revenue but are growing at a faster and more profitable rate.
- Distribution Model: The shift from an order-led to a distribution-led model for exports is another factor expected to enhance margins. Nuvama also anticipates a sharp improvement in FMEG profitability once demand picks up.
Stock Performance 🔥
Even with the recent decline, Polycab’s stock has seen a 24% gain so far in 2024, outperforming Nifty’s 15% return. Over the past 12 months, the stock has climbed 30%, outpacing Nifty’s 25% rise during the same period.
The market remains optimistic about Polycab’s long-term growth, even amid short-term margin pressures.