Shares of Polycab India jumped to a new high on Tuesday at ₹948.95 on the BSE but closed at ₹929.25, down 0.54 per cent over the previous day’s close. The stock has been gaining for fundamental reasons as well as on its entry into the MSCI India Global Smallcap index. However, the recent surge is thanks to the upgrade by Citigroup.

The stock has been one of the star performers this year, ever since its shares got listed at the bourses in April this year. Polycab will enter the MSCI Global Small Cap Index from November 26.

From the issue price of ₹538, the stock has almost doubled till date, as analysts remain bullish on the stock.

Financially, it has been reporting a strong performance. For the quarter ended September, the company posted a net profit of ₹192.16 crore against the June quarter profit of ₹133.51 crore. The topline also grew to ₹2,239.85 crore in the second quarter of the current fiscal, against ₹1,921.47 crore reported in the preceding quarter.

Global investment advisor Citigroup increased the target price for Polycab to ₹1,044 (from ₹950) as it increased its target P/E multiple to 20x (from 18x) to factor in a re-rating and continued traction in the company’s fast moving electrical goods (FMEG) business.

Well placed for growth

“We have a ‘buy’ rating on Polycab India. It has emerged as a market leader in the cable and wires industry and a successful entrant into the FMEG space through a mix of large and quality manufacturing base, wide distribution reach, induction of professional management combined with the vision of the promoter family, focus on balance sheet and cash flows and efforts to re-orient the company into the B2C mindset,” Citigroup said.

“We believe that due to healthy balance sheet, internal cash generation, distribution, brand and execution, Polycab is well placed to capitalise on growth opportunity in cables, wires and FMEG industries,” it said.

For YES Securities, it’s a high conviction buy idea. “In line with its aim to evolve as a large B2C player, the company is constantly investing into new products and new categories in the FMEG space. Led by strong revenue CAGR of 25 per cent over FY19-22E in the FMEG space and execution of large orders over the next two years in the C&W segment, we expect the company to witness a revenue/operating profit of 10.8 per cent/9.9 per cent CAGR over FY19-22E,” YES Securities said.

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