Polycab India shares rose 3.5 percent to Rs 5,078 at noon on March 05 after Morgan Stanley projected a nearly 52 percent upside in the stock. The brokerage assigned an “highweight” rating with a price target of Rs 7,395 per share, citing strong demand in the cables and wires segment.
According to Morgan Stanley, Polycab’s recent roadshows show that demand has picked up during the fourth quarter and exports have gained positive momentum. The company expects exports to contribute over 10 percent of its revenues over the next five years, aided by the US imposing import duties on competitors such as China and Mexico.
The brokerage expects limited disruption in the industry over the next four to five years despite the recent entry of UltraTech Cement into the segment. Scaling the cable business requires long approval cycles and a strong distribution network, while wiring requires strong electrician relationships for safety reasons.
Morgan Stanley expects EBIT margins for the sector to remain in the range of 12-14 percent in the near term and 11-13 percent in the long term. Polycab and other industry players such as KEI Industries and Havells witnessed heavy selling last week following UltraTech’s announcement.
However, Morgan Stanley’s outlook indicates continued growth potential for the sector. Polycab India’s revenue grew 24 percent to Rs 15,422 crore in the first nine months of 2024. For the latest quarter, net profit stood at Rs 464.3 crore, in line with expectations of Rs 450 crore but remained flat on a year-on-year basis.
Revenue for the period grew 20.4 percent to Rs 5,226 crore, slightly below the estimated Rs 5,369 crore. The company’s EBITDA margin expanded by nearly 70 basis points to 13.8 percent, surpassing the forecast of 12 percent.
At around 2:25 pm, the company’s shares were trading at Rs 5,065, up 3.26 per cent from its previous close on the NSE. Polycab India shares have had a stellar start to the year, rallying over 30 percent so far.
