Why do analysts recommend investing in Polycab shares?

Why do analysts recommend investing in Polycab shares?

The fourth quarter results of cable and wire making company Polycab India were in line with expectations. The company’s consolidated revenue declined by 13 per cent year-on-year. However, the company surprised the market with its net profit growth. During this time, it recorded a growth of 57 percent. The main reason behind this was the fall in commodity prices and increase in margin by 1.30 per cent. There are many other reasons for increasing interest of analysts in this stock.

After the lockdown has been lifted, all the manufacturing plants of the company have been restarted. The company is increasing its capacity to meet the demand of small cities. covid-19 has less impact on these cities.

At present, the outlook of the electrical industry seems weak due to Corona epidemic and reduction in expendable income. But, infrastructure and industrial development should continue. The main reason behind this is the possibility of some shift of industrial activity from China to India. It is expected that the company’s growth will be back on track.

Polycab is making big bets on the export market. He has also got success in this. Despite the covid-19, the export market has been stable. This made PolyCab.

Consumers are shying away from Chinese products. Polycab should benefit from this. The global electrical market is worth $ 40 trillion. This is also a reason for increasing interest of analysts in this stock.

To take advantage of its strong brand, PolyCab is also betting on Fast Moving Electrical Goods (FMEG) like fans, lighting etc. For example, the revenue share of FMEG has increased. It increased from 3 per cent in 2015-16 to 9 per cent in 2019-20.

Since this segment is still in its initial stage. Therefore, its margins are close to zero right now. However, margins are expected to increase due to the size of the FMEG segment and recent price increases. In the recent stock market crash, Polycab shares have come down by almost 50 per cent. Now its valuation has reached economical level. This is also the reason for analysts’ interest in this stock. 12 out of 15 analysts have suggested buying this stock. While 3 says it should hold

 

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