Polycab Stock Soars 13% in 8 Days: Is It Time to Invest?

The stock market has been abuzz with activity, particularly surrounding Polycab India, a prominent player in the electrical wires and cables sector. After a period of consolidation lasting nearly three months, Polycab shares have embarked on a significant upward trend during recent trading sessions. In just eight trading days, the stock has risen an impressive 13.14%, climbing from ₹6,475 to ₹7,326 per share.

On Tuesday, Polycab shares hit a record high of ₹7,353, marking a nearly 6% increase for the day. Just the previous day, JM Financial, a respected domestic brokerage firm, highlighted that the stock had been trading in a narrow range between ₹6,300 and ₹6,925 before breaking out with strong momentum last Friday. This breakout was characterized by unusually high trading and delivery volumes, signaling a renewed interest from investors looking to capitalize on Polycab’s market trajectory.

“The ongoing series has opened with a total future open interest of 2.2 million shares, compared to an average of 2.6 million shares over the last three series. Following the breakout, open interest has risen to 2.3 million shares, suggesting a revival of buying interest in Polycab. Historically, the stock has shown resilience in October, closing positively in three out of the last five years, with an average return of 7%,” stated JM Financial.

The brokerage has set an optimistic target price of ₹7,700 for the stock, with a recommended stop-loss level at ₹6,600, reflecting a strategic approach to risk management amidst a bullish market outlook.

Positive Outlook from Major Brokerages

Global brokerage firm UBS has initiated coverage on Polycab India, assigning a ‘buy’ rating along with a sum-of-the-parts (SOTP) price target of ₹8,550, which represents the highest target among market analysts. UBS has identified Polycab’s substantial 40% market share in domestic electrification as a vital asset, positioning the company to leverage ongoing structural and cyclical growth drivers in the cables and wires industry, particularly in relation to the rising demand for low-voltage infrastructure across India.

Furthermore, UBS emphasized Polycab’s competitive advantages, which include extensive manufacturing capabilities and a dominant presence in the market. The company benefits from a strong distribution network for both business-to-consumer (B2C) and business-to-business (B2B) operations. Its innovative export model offers additional growth prospects, tapping into international markets that remain largely untapped.

Key short-term catalysts for Polycab’s performance include robust domestic volume increase, expansion of market share, and a significant uplift in export activities, according to UBS’s analysis.

Jefferies, another financial services firm, has also raised its price target for Polycab to ₹7,970 from a previous target of ₹8,420, while continuing to endorse a ‘buy’ recommendation.

Motilal Oswal, a domestic brokerage, initiated coverage on Polycab earlier this year with a ‘buy’ rating and established a target price of ₹7,500. The brokerage anticipates a healthy revenue growth of 14% CAGR over FY24–26, driven mainly by a 15% increase in the cables and wires segment and a 10% growth in the fast-moving electrical goods (FMEG) segment.

Additionally, Motilal Oswal predicts an EBITDA growth rate of 14.5% CAGR and a 15% CAGR for net profits during the same period. The brokerage expects EBITDA margins to stabilize at 13.6% in FY24, with slight fluctuations in subsequent years—13.1% in FY25 and 13.7% in FY26—as compared to 13.1% in FY23 and an average of 12% throughout the FY18-23 span.

The Indian cables and wires industry, along with FMEG products, is projected to be worth approximately ₹1.8 trillion in FY23. This industry is experiencing growth propelled by a strong government focus on infrastructure development, demographic changes like the emergence of nuclear families, increased rural electrification, and a rising trend in exports of cables and wires.

Disclaimer: The insights and projections shared here are based on analyses from various analysts and brokerage firms and are not representative of Mint’s views. Investors should consult with certified financial experts before making investment decisions.