At the upper price band, Polycab is valued at a PE multiple of 21.6 times its FY18 earnings, which is lower than its peers like KEI Industries, Havells India, Bajaj Electricals and Crompton Greaves Consumer.
“Given the brand position, financials and business prospects, we suggest investors can subscribe to the issue,” said Mrinalini Chetty, research analyst, Centrum Wealth. “Being a leading player with a strong brand portfolio and distribution network could bode well for Polycab’s new product launches and expansion of FMEG business. In addition, government initiatives in electrification, housing for all and better prospects in the electrical goods may be added triggers for business growth.”
Polycab has a strong growth profile with revenue, operating profit and net profit reporting a CAGR of 10 per cent, 23 per cent and 42 per cent, respectively, during FY16-18. Further, it has low net debt/ equity of 0.2 as on December 2019.
“At the upper price band, Polycab is valued much lower than the industry average,” said a note by Sharekhan. “Polycab has wide distribution network across India which enables faster roll out of new products and gives them a competitive advantage.”
Post the IPO, the promoter shareholding will fall to 68.7 per cent from 78.9 per cent. At the upper price band, company’s market capitalisation stands at Rs 8,000 crore. Return on equity (RoE) stood at 17 per cent in FY18 and return on capital employed (RoCE) at 14 per cent.
For the nine months ended December 2018, revenue of the company grew 17 per cent to Rs 5,561 crore. During this period, net profit doubled to Rs 360 crore. The EBITDA margin was 13.37 per cent while PAT margin was 6.44 per cent.
