polycab indiaseptember 13, 2019 - icici...
Post on 04-Aug-2020
2 Views
Preview:
TRANSCRIPT
Stock Tales are concise, holistic stock reports across wider spectrum of sectors. Updates will not be periodical but based on significant events or change in price.
Stock_____
TALES
ICIC
I S
ecurit
ies –
Retail E
quit
y R
esearch
Stock T
ale
s
September 13, 2019
CMP: | 628 Target: | 670 (7%) Target Period: 12 months
Polycab India (POLI)
HOLD
Profitable FMEG holds key…
Incorporated in 1996, Polycab India (PIL) is India’s largest cable & wire (C&W)
company with an organised market share of ~18%. Promoted by the
Jaisinghani brothers, PIL earns ~88% of its total topline from the C&W
segment while other two segments fast moving electrical goods (FMEG) and
engineering, procurement, construction (EPC) contributes 8% and 4% to
topline, respectively. PIL’s diversified business in FMEG in FY14 was mainly
due to 1) reduced dependency from W&C category, 2) increased presence
in B2C category (fans, switchgear, LED lightings & fixtures and 3) leveraging
strong dealer base to push FMEG products into channels. PIL has developed
a strong distribution network of ~3100 dealers and distributors across India.
These dealers, distributors serve more than 100,000 retail outlets. PIL posted
revenue, earnings CAGR of ~15%, ~39%, respectively, in FY16-19 led by
higher EBITDA margin. We believe organic growth in core business coupled
with lower interest outgo (owing to loan repayment through proceeds from
fresh issue) would drive profitability of the business, going forward. We like
PIL for its market leadership position in C&W category with strong growth in
its FMEG business, going forward. Higher profitability coupled with a lighter
balance sheet would improve the return ratios RoCE, RoE to 22%, 15%,
respectively. In light of this, we ascribe 15x FY21E earnings with a HOLD
rating on the stock and a target price of | 670share.
Leveraging existing distributors to boost FMEG segment
The FMEG products of Polycab largely include switchgears, fans, lightings &
luminaires and solar pumps. The company entered the FMEG segment in
FY14. In the last four years, it has achieved a turnover of ~| 645 crore.
Leveraging the ‘Polycab’ brand, PIL’s FMEG segment is likely to record
revenue CAGR of 25% in FY19-21E on a low base and strong distribution
channel (~3100 dealers) across India’s diverse customer base.
Focus on reducing working capital requirement
To reduce debtor days, it has increased use of channel financing. Channel
financing not only reduces risk of non-payment but also significantly
reduces working capital requirement. A reduction in working capital
requirement through channel financing would boost the quality of the
balance sheet and lower interest outgo, thus aiding earnings growth.
Valuation and outlook
We like PIL for its normalised revenue, earnings growth with stable margin.
However, future demand of C&W coupled with profitable growth in the
FMEG segment would be key monitorables and re-rating factor for PIL, going
forward. We assign 15xFY21E earning with a HOLD rating and a target price
of | 670/share.
Key Financial Summary
ssf
(| crore) FY16 FY17 FY18 FY19 FY20E FY21E CAGR19-21E
Net Sales 5202.4 5500.1 6770.3 7956.0 8935.1 10028.7 12.3
EBITDA 490.8 479.9 728.9 923.2 929.3 1093.1 8.8
EBITDA Margin (%) 9.4 8.7 10.8 11.6 10.4 10.9
Net Profit 184.7 233.0 358.6 500.3 534.7 641.3 13.2
EPS (|) 13.1 16.5 25.4 35.4 37.9 43.1
P/E (x) 48.0 38.1 24.7 17.7 16.6 14.6
RoE (%) 10.4 11.7 15.3 17.6 14.1 14.5
RoCE (%) 15.8 14.7 20.9 28.3 21.7 22.0
Source: Company, ICICI Direct Research
Particulars
Particular Ammount
Market cap (| crore) 8670.0
Total Debt (| crore) 192.0
Cash & Inves (| crore) 317.6
EV (| crore) 8544.5
52 Week H/L 677/525
Equity Capital (| crore) 141.2
Face Value(|) 10.0
Price Performance
10,000
10,500
11,000
11,500
12,000
12,500
0
200
400
600
800
Apr-19
May-19
May-19
Jun-19
Jul-19
Jul-19
Aug-19
Polycab (LHS) NSE (RHS)
Research Analyst
Sanjay Manyal
sanjay.manyal@icicisecurities.com
Hitesh Taunk
hitesh.taunk@icicisecurities.com
ICICI Securities | Retail Research 2
ICICI Direct Research
Stock Tales | Polycab India
Company Background
Incorporated in 1996, Polycab India (PIL) is engaged in the business of
manufacturing and selling wires & cables (revenue contribution of ~88%)
and fast moving electrical goods (FMEG) under the “Polycab” brand
(revenue contribution of 8%). With a value market share of ~18% in the
organised industry, PIL is one of the largest manufacturers in the wires and
cables industry in India. Apart from wires and cables, the company entered
the engineering, procurement and construction (EPC) business in 2009
(revenue contribution of ~4%), which includes design, engineering, supply,
execution and commissioning of power distribution and rural electrification
projects. As a part of diversification and to leverage the strong ‘Polycab’
brand, PIL entered the FMEG product category in 2014. The FMEG product
includes electric fans, LED lighting & luminaires, switches & switchgears,
solar products and conduits & accessories. PIL has 24 manufacturing
facilities in India of which four are dedicated to FMEG product categories.
Over the years, PIL has developed a strong distribution network of dealers
and distributors across India with a total count of ~3100 at the end of FY19.
These dealers and distributors serve more than 100,000 retail outlets. The
company’s products are largely used in industries like power, oil & gas,
construction, IT parks, infrastructure, metal and cement industries. PIL’s
customer base is well diversified while none of the customers contributes
more than 5% to its topline, reducing dependency on any single customer.
PIL has increased its focus towards the FMEG segment where revenue
contribution has increased from 3% in FY16 to 8% in FY19. The segment
recorded strong sales growth of 48% in FY16-19 and turned profitable in
FY17 albeit a low margin. The cable & wire segment recorded a sales CAGR
of 10% (~13% adjusted to excise) with segment profitability improving from
~5% in FY16 to ~11% in FY19. The company recorded consolidated
revenue, earning CAGR of 15% and 39%, respectively, in FY16-19.
Exhibit 1: Revenue breakup in FY16
Source: Company, ICICI Direct Research
Exhibit 2: Revenue breakup in FY19
Wires &
cables
88%
FMEG
8%
EPC
4%
Source: Company, ICICI Direct Research
Wires &
cables
92%
FMEG
3%
EPC
5%
ICICI Securities | Retail Research 3
ICICI Direct Research
Stock Tales | Polycab India
Investment Rationale
Various government initiatives to drive cable & wire demand
The Indian cables & wires industry recorded a value CAGR of ~12% in the
last five years to reach | 58500 crore in FY19E. The growth came on the back
of factors like electrification of rural villages and households (Power for All);
investments in transmission and distribution systems for modernisation and
increasing efficiencies; increased demand from renewable power
generation, particularly solar and wind energy; infrastructure development
initiatives taken by the Government of India like Smart Cities Mission and
mass transit systems; and improved lifestyle and consumer spending. The
domestic wire & cable industry is further likely to grow at a CAGR of 11% in
next five years. The demand for building wires and power cables is expected
to be spurred by government schemes such as Pradhan Mantri Sahaj Bijli
Har Ghar Yojana (‘Saubhagya’ scheme) and Power for All, focusing on
electrification of rural households and T&D efficiencies, as well as an
increase in cabling demand from commercial establishments and public
utilities. Growth in renewable energy capacities is expected to drive demand
for solar cables and elastomeric cables used in windmill applications.
The Indian cables & wires industry is gradually moving from a largely
unorganised sector comprising smaller regional players towards an
organised sector comprising pan-India branded market players across
categories. The share of the organised sector has increased from 61% to
66% in the last five years. According to estimates, the share of organised
players is likely to increase to ~74% by FY23E on account of GST
implementation and improvement in efficiency and cost structure, thereby
reducing the price gap between the organised, unorganised sectors and the
economies of the pan-India distribution network.
Exhibit 3: Domestic cable & wire industry growth trend
0
10000
20000
30000
40000
50000
60000
70000
FY16 FY17 FY18 FY19E
Industry (| crore)
CAGR 12%
Source: Company, ICICI Direct Research
Increase in organised pie to benefit Polycab in long term
We believe PIL being a market leader (18% value market share in the
organised cable & wire industry) would be a direct beneficiary of the shift in
demand from the unorganised to organised category. This, coupled with
government initiatives in power and infrastructure like increased
infrastructure expenditure, growth in fire survival cables supported by
metro, airport and commercial real estate projects and Smart Cities
Missions’ investment in underground cables are likely to boost demand for
the cable & wire industry, going forward. The company plans to strengthen
its leadership position in the wires & cables market in India by increasing the
share of business with existing customers, winning new customer contracts,
geographical expansion and development of innovative and customised
products.
ICICI Securities | Retail Research 4
ICICI Direct Research
Stock Tales | Polycab India
Exhibit 4: Share of organised and unorganised pie in FY15
Organised, 61%
Unorganised, 39%
Source: Company, ICICI Direct Research
Exhibit 5: Organised pie rises in last four years by 500 bps
Organised, 66%
Unorganised, 34%
Source: Company, ICICI Direct Research
Exhibit 6: C&B revenue to grow at 11% CAGR in FY19-21E
4825.7
5125.4
6131.3
6991.8
7770.7
8625.5
0.0
1000.0
2000.0
3000.0
4000.0
5000.0
6000.0
7000.0
8000.0
9000.0
10000.0
FY16 FY17 FY18 FY19 FY20E FY21E
(| crore)
CAGR 11%
Source: Company, ICICI Direct Research
Exhibit 7: Market leader in C&W category
Source: Company, ICICI Direct Research, Chart contains revenue from only C&B segment
Leveraging existing distributors to boost FMEG segment
The FMEG products of Polycab largely include switchgears, fans, lightings &
luminaires and solar pumps. The company entered the FMEG segment
during FY14. In the last four years, it has achieved a turnover of ~| 500 crore.
This was largely due to the company’s strong pan India reach with over 3100
dealers. PIL is planning a similar topline growth in the next two years by
leveraging its strong brand, distribution network, diverse customer base and
manufacturing capabilities. The company aims to grow its market share in
existing FMEG product segments with a focus on expanding distribution
reach, increasing rural penetration and greater retail expansion. PIL is also
undertaking a detailed market mapping to identify and appoint new channels
for geographical expansion.
7064
3501
2983
3235
0
1000
2000
3000
4000
5000
6000
7000
8000
Polycab KEI Industries Finolex cables Havells India
(| c
rore)
ICICI Securities | Retail Research 5
ICICI Direct Research
Stock Tales | Polycab India
In order to cater to the changing needs of customers, the company plans to
strengthen its FMEG product portfolio and enter new product segments by
way of continuous product development and innovation. Under the new
product category, PIL is planning to enter the high margin product category
such as street lighting and other specialised products like domestic and
agriculture pumps, domestic air purifiers and domestic water purifiers. The
segment turned profitable in FY17 but margins remain low compared to
other established players.
Exhibit 8: Number of dealers and distributors by product
Company No of dealers
Polycab 3133
KEI Industries 1450
Finolex Cables 3500f
Source: Company, ICICI Direct Research
Exhibit 9: Low base coupled with dealer addition to drive FMEG sales growth
Source: Company, ICICI Direct Research
Exhibit 10: Higher advertisement expenditure to increase market share
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
FY16 FY17 FY18 FY19 FY20E FY21E
Source: Company, ICICI Direct Research
According to an estimate by Crisil, (i) the switches industry in India is
expected to grow at ~9% CAGR to | 6200 crore by FY23, driven by modular
switches that have higher realisations, (ii) the lighting and luminaire industry
in India is expected to grow at a CAGR of ~7% to reach an estimated market
size of | 30100 crore by FY23 largely due to a decline in LED chip prices,
government policies to encourage LEDs and increasing consumer
awareness for energy efficient technologies such as LED lighting and (iii) the
electric fans industry in India is expected to grow at a CAGR of ~7% to
| 11100 crore by FY23 largely due to government initiatives, the introduction
of value added products by major fan manufacturers, replacement demand
in urban areas, rise in rural penetration and improving economic factors.
171.0
307.5
475.0
639.3
804.1
1005.1
0
200
400
600
800
1000
1200
FY16 FY17 FY18 FY19 FY20E FY21E
(|
crore)
CAGR ~25%
ICICI Securities | Retail Research 6
ICICI Direct Research
Stock Tales | Polycab India
EPC business to grow at steady rate
Under the EPC division, PIL provides electrical turnkey solutions comprising
project management, onsite execution and resource management through
specialised erectors and financial management. The solutions are largely
provided for the transmission and distribution sectors involving projects in
extra high voltage and high voltage levels for various government utilities in
India. These projects typically require a large supply of cables, wires and
conductors. PIL supplies these components. Hence, the EPC business is
largely an extension of PIL’s product business.
PIL has completed a range of projects including refinery works, rural and
urban electrification and extra high voltage cable laying since 2009 when it
entered the business. Some of the key projects it has completed include the
110 kV extra high voltage cable laying in Kerala, electrification works for
BPCL Kochi refinery, urban electrification of Nerul division in Navi Mumbai,
Maharashtra, conversion of overhead infrastructure into underground
cables in Azamgarh, Mau and Bahraich and rural electrification works in the
town of Vaishali. We believe the EPC business would grow in line with the
company’s C&B business.
Exhibit 11: EPC business to grow in line with Polycab’s C&B business
255.4
141.1
238.8
459.7
510.1 566.2
0.0
100.0
200.0
300.0
400.0
500.0
600.0
FY16 FY17 FY18 FY19 FY20E FY21E
(| crore)
CAGR 11%
Source: Company, ICICI Direct Research
Manufacturing facilities with high degree of backward integration
Currently, PIL is operating 24 manufacturing facilities. Four of these 24
manufacturing facilities are for production of FMEG, including a joint venture
with Techno to manufacture LED products. Its focus is on backward
integration, where it produces a substantial portion of raw materials and
sources remaining from third-party suppliers. In 2016, PIL entered into a
50:50 joint venture with Trafigura to set up the Ryker Plant that will, once
fully operational, fulfil a substantial part of its demand for copper wire rods.
Apart from the Ryker Plant, it also produces other key raw materials that are
used in manufacturing wires & cables, FMEGs. These key raw materials
include aluminium rods (for aluminium conductor), higher size of copper
rods (for required size of copper conductors to manufacture cables, wires),
various grades of PVC, rubber, XLPE compounds, GI wire, strip (for
armouring). Producing own raw materials reduces reliance, risks of
procuring raw materials from domestic, international markets by ensuring a
consistent and reliable supply of quality raw materials. Such backward
integration also helps PIL maintain control of the supply chain, with lower
costs of operations enabling it to sell products at competitive prices.
ICICI Securities | Retail Research 7
ICICI Direct Research
Stock Tales | Polycab India
Focus on reducing working capital requirement through
channel financing
The nature of the business requires significant working capital (~90 days of
net working capital cycle) mainly due to procurement of raw material and
higher receivable days. However, the company’s limit exposure in the EPC
segment (EPC business typically has slower payment from customers and,
therefore, higher working capital requirements) and significant portion of the
business through its dealer network restricts any aberration in working
capital days. Further, to reduce its debtor days, it has increased the use of
channel financing, whereby customers enter into arrangements with banks
through which PIL receive payment directly from the banks, who, in turn,
takes on credit risk and seeks to collect from customers. Channel financing
not only reduces risk of non-payment but also significantly increases
payments cycle. We believe a reduction in working capital requirement
through channel financing would boost the quality of balance sheet and
lowering interest outgo, thus aiding earnings growth, going forward.
Exhibit 12: Channel financing to help reduce working capital requirement, going
forward
97
83
74
67
60 60
69
101
74
92 92
85
74
90
50
70
60 58
0
20
40
60
80
100
120
FY16 FY17 FY18 FY19 FY20E FY21E
Debtor Days Inventory Days Payable Days
Source: Company, ICICI Direct Research
ICICI Securities | Retail Research 8
ICICI Direct Research
Stock Tales | Polycab India
Key risks and concerns
Higher exposure in cable & wire segment poses business
concentration risk
The cable & wire business of the company contributes ~88% to the topline
As a result, the business and financial condition is heavily dependent on the
performance of the wires and cables market in India. The company is
exposed to fluctuations in the performance of these markets. In the event of
a decline in demand for wires and cables in India or abroad, the company is
expected to experience pronounced effects on business, results of
operations, financial condition, cash flows and prospects. The cable & wire
market may be impacted by, among others, changes in government policies,
government initiatives, economic conditions, income levels and interest
rates, which may negatively impact demand for and valuation of products.
Exchange rate fluctuation
The company largely imports its raw material such as aluminium, copper
and PVC compounds, where prices are reference to benchmarks quoted in
US dollar. Hence, expenditures are largely influenced by the value of the US
dollar. Depreciation of the rupee against the US dollar, the Euro and other
foreign currencies may adversely affect results of operations by increasing
the cost of imported raw materials.
Competitive pressure in FMEG business
The industry and markets for cable & wire and FMEG products are
characterised by factors like rapid technological change, development of
new end products and their rapid obsolescence, evolving industry standards
and significant price erosion over the life of a product. The company may
face stiff competition from large consumer durable players such as
Crompton Greaves Consumer Electricals, Orient Electric and Havells India,
which may restrict growth in segment margin of FMEG segment.
Payment delay in EPC business may impact working capital
cycle
The nature of the business requires significant amounts of working capital
primarily for raw material purchases and manufacturing products before it
receive payments from its customers. Working capital requirements can also
vary significantly across business lines, with businesses like government
contracts and EPC business typically having slower payment from
customers, and, therefore, higher working capital requirement. If the
company’s EPC business grows exponentially (on a low base and aggressive
bidding on government orders) relative to other business lines, we expect
that working capital ratios to be adversely affected
ICICI Securities | Retail Research 9
ICICI Direct Research
Stock Tales | Polycab India
Valuation and outlook
PIL is a strong brand in the C&W industry and has a history of strong revenue
earning CAGR of 15%, 39% respectively. Further, the company is likely to
record revenue earning CAGR of 12% each in FY19-21E led by continuous
growth in the FMEG segment. The C&B business of PIL likely to grow at
CAGR of ~11% supported by revival in demand vis-à-vis market share gains
from the unorganised pie. On the EBITDA margin front, we believe EBITDA
margins will remain in the range of 10-11% (in line with historical average)
with higher employee cost and advertisement expenditure that would help
increase revenue contribution of FMEG business. We believe organic
growth in core business coupled with lower interest outgo (owing to loan
repayment through proceeds from fresh issue) would drive profitability of
the business. Considering PIL’s market leadership position in the C&W
business coupled with easing balance sheet (though debt reduction), we
value the stock at 15xFY21E earnings with HOLD rating.
Exhibit 13: Revenue growth driven by FMEG
5202
5500
6770 7
956 8935
10029
0
2000
4000
6000
8000
10000
12000
FY16 FY17 FY18 FY19 FY20E FY21E
(| crore)
CAGR 12%
Source: Company, ICICI Direct Research
Exhibit 14: EBITDA margin to remain stable
9.4
8.7
10.8
11.6
10.410.9
0
2
4
6
8
10
12
14
FY16 FY17 FY18 FY19 FY20E FY21E
(%
)
Source: Company, ICICI Direct Research
Exhibit 15: PAT growth supported by lower interest outgo
185 2
33
359
500 535
641
0
100
200
300
400
500
600
700
FY16 FY17 FY18 FY19 FY20E FY21E
(| crore)
CAGR 13%
Source: Company, ICICI Direct Research
Exhibit 16: Improvement in profitability of FMEG to trigger
return ratio
10.411.7
15.3
17.6
14.1 14.515.8
14.7
20.9
28.3
21.7 22.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
FY16 FY17 FY18 FY19 FY20E FY21E
(%
)
RoE RoCE
Source: Company, ICICI Direct Research
Exhibit 17: Valuation matrix
FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19FY20EFY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19FY20EFY21E
Polycab 8,868 7956 8935 10029 11.6 10.4 10.9 500.3 534.7 641.3 0.1 0.0 0.0 28.3 21.7 22.0 17.6 14.1 14.5 17.7 16.6 14.6
KEI Ind 3677 4227 4976 5732 10.5 10.6 10.6 182 228 277 0.6 0.5 0.4 20.1 22 21.4 26 26 25 20.2 16.1 13.3
Finolex Ind 6399 3079 3237 3531 14.7 14.4 14.5 344 358 392 0.0 0.0 0.0 14.5 13.5 13.3 14.9 13.9 13.7 18.6 17.9 16.3
RoCE RoE PEMcap
| cr
Revenue EBITDA margin PAT D/E
Source: Company, Bloomberg, ICICI Direct Research
ICICI Securities | Retail Research 10
ICICI Direct Research
Stock Tales | Polycab India
Financial Summary
Exhibit 18: Profit & Loss statement (| crore)
(Year-end March) FY18 FY19 FY20E FY21E
Revenue 6,770.3 7,956.0 8,935.1 10,028.7
Growth (%) 23.1 17.5 12.3 12.2
Raw material expense 5,205.3 5,966.0 6,737.1 7,471.4
Employee expenses 259.3 300.2 393.1 501.4
Power & Fuel cost 93.7 96.6 116.2 130.4
Packing, frieght, & forwarding charges 125.0 149.9 169.8 190.5
Other expenses 358.1 520.1 589.7 641.8
Total Operating Exp 6,041.4 7,032.8 8,005.8 8,935.6
EBITDA 728.9 923.2 929.3 1,093.1
Growth (%) 51.9 26.7 0.7 17.6
Depreciation 133.0 141.4 147.4 156.4
Interest 93.7 116.7 55.2 25.2
Other Income 64.4 93.3 71.5 60.2
PBT 566.7 758.4 798.1 971.7
Total Tax 208.2 255.8 263.4 330.4
PAT 358.6 500.3 534.7 641.3
Source: Company, ICICI Direct Research
Exhibit 19: Cashflow statement (| crore)
(Year-end March) FY18 FY19 FY20E FY21E
Profit after Tax 358.6 500.3 534.7 641.3
Add: Depreciation 133.0 141.4 147.4 156.4
(Inc)/dec in Current Assets 120.6 -739.6 -262.1 -402.9
Inc/(dec) in CL and Provisions -380.8 1236.9 -366.0 68.1
Others 93.7 116.7 55.2 25.2
CF from operating activities 324.9 1255.7 109.3 488.1
(Inc)/dec in Investments 1.3 2.2 0.0 0.0
(Inc)/dec in Fixed Assets -172.7 -277.0 -350.0 -450.0
Others 18.6 -20.7 -0.6 -0.7
CF from investing activities -152.9 -295.5 -350.6 -450.7
Issue/(Buy back) of Equity 0.0 0.0 7.4 0.0
Inc/(dec) in loan funds -93.1 -535.7 -100.0 -50.0
Dividend paid & dividend tax -17.0 0.0 -3.4 -3.6
Others -82.6 -116.7 344.9 -25.2
CF from financing activities -192.7 -652.4 248.9 -78.8
Net Cash flow -20.6 307.9 7.6 -41.3
Opening Cash 30.1 10.7 317.6 325.2
Closing Cash 10.7 317.6 325.2 283.9
Source: Company, ICICI Direct Research
Exhibit 20: Balance Sheet Statement (| crore)
(Year-end March) FY18 FY19 FY20E FY21E
Liabilities
Equity Capital 141.2 141.2 148.7 148.7
Reserve and Surplus 2,206.4 2,705.7 3,637.2 4,274.9
Total Shareholders funds 2,347.6 2,847.0 3,785.8 4,423.5
Total Debt 727.7 192.0 92.0 42.0
Other non current liabilities 77.6 57.2 57.2 57.2
Total Liabilities 3,152.9 3,096.2 3,935.0 4,522.8
Assets
Gross Block 1,567.5 1,785.9 2,135.9 2,585.9
Less: Acc Depreciation 370.4 510.3 657.7 814.2
Total Fixed Assets 1,333.1 1,468.6 1,671.2 1,964.7
Investments 31.5 29.4 29.4 29.4
Inventory 1,365.7 1,995.8 2,203.2 2,335.4
Debtors 1,378.8 1,469.4 1,468.8 1,648.5
Loans and Advances 15.3 17.8 20.0 22.5
Other CA 243.2 259.6 312.7 401.1
Cash 10.7 317.6 325.2 283.9
Total Current Assets 3,013.7 4,060.2 4,329.9 4,691.5
Creditors 922.1 1,520.2 1,591.2 1,593.6
Provisions 47.1 37.1 38.8 38.9
Other CL 326.0 974.8 536.1 601.7
Total Current Liabilities 1,295.2 2,532.1 2,166.1 2,234.2
Net current assets 1,718.5 1,528.1 2,163.8 2,457.3
Other non current assets 69.8 70.1 70.7 71.4
Total Assets 3,152.9 3,096.2 3,935.0 4,522.8
Source: Company, ICICI Direct Research
Exhibit 21: Key Ratios
(Year-end March) FY18 FY19 FY20E FY21E
Per share data (|)
EPS 25.4 35.4 37.9 43.1
Cash EPS 34.8 45.4 48.3 53.7
BV 166.3 201.6 268.1 297.6
DPS 1.2 0.0 0.2 0.2
Operating Ratios (%)
EBITDA Margin 10.8 11.6 10.4 10.9
PAT Margin 5.3 6.3 6.0 6.4
Asset Turnover 4.3 4.5 4.2 3.9
Inventory Days 73.6 91.6 90.0 85.0
Debtor Days 74.3 67.4 60.0 60.0
Creditor Days 49.7 69.7 65.0 58.0
Return Ratios (%)
RoE 15.3 17.6 14.1 14.5
RoCE 20.9 28.3 21.7 22.0
RoIC 18.3 22.4 20.1 20.5
Valuation Ratios (x)
P/E 24.7 17.7 16.6 14.6
EV / EBITDA 13.1 9.5 9.3 7.9
EV / Net Sales 1.4 1.1 1.0 0.9
Market Cap / Sales 1.3 1.1 1.0 0.9
Price to Book Value 3.8 3.1 2.3 2.1
Solvency Ratios
Debt / Equity 0.3 0.1 0.0 0.0
Current Ratio 3.1 2.4 2.5 2.7
Quick Ratio 1.7 1.1 1.1 1.3
Source: Company, ICICI Direct Research
ICICI Securities | Retail Research 11
ICICI Direct Research
Stock Tales | Polycab India
RATING RATIONALE
ICICI Direct endeavors to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according to their notional target price vs. current market price and then categorizes them as Buy, Hold,
Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined
as the analysts' valuation for a stock
Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%
Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com
ICICI Direct Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com
ICICI Securities | Retail Research 12
ICICI Direct Research
Stock Tales | Polycab India
ANALYST CERTIFICATION
I/We, Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this
research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the
specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in
the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.
Terms & conditions and other disclosures:
ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI
Securities Limited is a SEBI registered Research Analyst with SEBI Registration Number – INH000000990. ICICI Securities Limited SEBI Registration is INZ000183631 for stock broker. ICICI
Securities is a subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance,
general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment
banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons
reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions, trading volume etc as opposed to focusing
on a company's fundamentals and, as such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical
Research Reports.
Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.
ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail Research. The views and opinions
expressed in this document may or may not match or may be contrary with the views, estimates, rating, and target price of the Institutional Research.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly
confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or
reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no
obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate
that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where
ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness
guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe
for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat
recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy
is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own
investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent
judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign
exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily
a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ
materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other
assignment in the past twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report
for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or
specific transaction.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did
not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI
Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day
of the month preceding the publication of the research report.
Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject
company/companies mentioned in this report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such
distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such
jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come
are required to inform themselves of and to observe such restriction
top related