Polycab – A meritable portfolio candidate

Polycab India Ltd is the market leader in the wires and cables segment, the company is well set-up to evolve into an industry leader in the consumer durables market.

Polycab, a leading wires & cables manufacturer, persistently reports healthy numbers every quarter. The business is booming and ready to deliver yet another strong year as the management expects its H2FY23 performance to be better than H1.


Quarterly Earnings Results Walkthrough

Polycab gave an 11 percent year-on-year (YoY) growth in revenues for the July–September period through decent volume growth in the Cables and Wires business. Comparing with the pre-pandemic level, consolidated sales grew at a decent CAGR of 16 percent. The Q2 EBITDA rose 43 percent YoY, due to a small slip in margins. A strong growth in exports and sensible price revisions have well contributed to the margin improvement.

Revenues from its core business which is the Wires & Cables (W&C) has jumped 13 percent on behalf of a robust demand environment. The export business progressed positively and contributed 13 percent to the revenue, with a growth of 75 percent YoY on a healthy base.

The FMEG (Fast Moving Electrical Goods) business was in distress as sales contracted 12 percent YoY, mainly due to the subdued demand environment, exacerbated by the realignment of the distribution strategy undertaken under Project LEAP.

The company remains structurally positive on long-term prospects with the sustained increase in the B2C (business to consumer) mix and the implementation of Project Leap, targeting Rs 20,000 crore revenues by FY26.

Technical Analysis

Polycab Weekly Candlestick Chart on Sharekhan’s TradeTiger

The stock is hugely overbought and faces heavy resistance at the Rs 2700 price range. MFI is at 84 which indicates that the stock is highly expensive. The stock price reverses in the zone around its lifetime high of Rs 2862.

If we observe the retracement levels, the 423.6% level seems fairly achievable as the price perpetually fights to surpass the resistance band.

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