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Synopsis: Polycab India's shares declined after announcing Q2 results despite robust earnings, reflecting a 3.6% rise in net profit. The stock's performance underscored concerns about operating margins, yet brokerages like Jefferies and Nuvama are optimistic, citing growth in core segments and a positive long-term outlook. The firm's strategic expansions and strong market positioning signal potential, with Polycab poised to capitalize on emerging opportunities despite short-term challenges.
Shares of Polycab India Ltd. fell by 7% after the company announced its Q2 FY24 results. Despite the dip, brokerages remain largely positive. The firm reported a 3.6% year-on-year (YoY) rise in net profit to Rs445.2 crore, up from Rs429 crore in the same period last year. Revenue surged by 30.4% YoY to Rs5,498.4 crore, showcasing strong business performance, particularly in its FMEG segment, which grew by 18%.
Brokerage Reactions:
Jefferies retained a 'Buy' rating with a target price of Rs8,315, citing strength in the wires business and positive long-term prospects.
ICICI Securities maintained a 'Hold' recommendation, adjusting its target price to Rs6,790, reflecting ongoing challenges in operating margins.
Nuvama Institutional Equities echoed a bullish stance, setting a target of Rs8,340, emphasizing growth in exports and overall improved working capital.
The FMEG segment contributed to revenue growth despite facing margin pressures, and Polycab's market cap has reduced to Rs1.04 lakh crore following the share price dip.
Outlook: Chairman Inder T. Jaisinghani highlighted the firm's robust market demand and strategic expansions, and recent upgrades in credit ratings reflect a strong financial outlook. Polycab continues to invest in expanding its operations, with plans to spend Rs10-11 billion in FY25, signifying confidence in future growth. Analysts flagged key risks including a potential slowdown in capital expenditure and fluctuations in copper prices.
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