MUMBAI : The stock prices of Polycab India Ltd, which scaled fresh highs this week, are up more than 50% year-to-date. The strong growth in its wires and cables segment, FMEG (fast-moving electrical goods) portfolio, and international business have driven street sentiments. The March quarter performance holds testimony as revenues grew 43%year-on-year (y-o-y). Analysts at Yes Securities Ltd said that revenues were 12% ahead of their estimates.

Healthy pickup in infra and industrial project activities meant wires and cables business grew 35% y-o-y to Rs2,487.5 crore in Q4FY21. Improving consumer sentiment, and higher sales realization helped, too. The company said business performance was broadly consistent across distribution channels and institutional business. The institutional business saw decent sequential recovery. Housing wires sustained strong momentum.

The FMEG business saw healthy pickup at 89% y-o-y to Rs347 crore in Q4FY21 on the back of healthy consumer demand, distribution and strong execution. The company said that growth was strong across categories and regions. Market share gains, too, were prominent across the board. The major encouragement was provided by segment Ebit margin improvement that, at 7% in Q4FY21, improved further by over 100bps over Q3FY21.

The impact of rising commodity prices as that of copper and aluminium was visible on the operating performance. The company, though, was able to manage with cost controls, price hikes, and such.

Overall Ebitda grew 40.1% y-o-y with an Ebitda margin of 13.9%. Ebitda margin contracted by 25bps y-o-y. Pricing actions, leverage benefits and cost-saving initiatives helped maintain Ebitda margin, despite the sharp contraction in gross margins, said analysts at Yes Securities.

Moving forward, the prospects remain promising. The company, regularly gaining market share, now commands 20-22% of the organized market, up from 18% two years back, suggests analysts' data. The Institutional business, too, has seen strong rebound. Though near-term uncertainties due to covid-led lockdowns may weigh, analysts expect good growth prospects in FY22.

The electrical gadgets/appliances business under FMEG is also marking promising progress. Analysts say fans continues to pose healthy growth, while the lighting product business nearly doubled and switches and switch gears business grew 2.5x. Improved product mix, calibrated pricing actions and design optimization initiatives led to healthy improvement in profitability during the quarter.

Though exports were softer, it was mainly due to the high base effect. Year ago quarter had seen supplies of order from Dangote. Further, the delay in projects and large constructions across the world, too, has a bearing. Polycab has set up front ends in developed countries such as the US and Australia. This will help develop sustainable business growth prospects.

Overall, analysts expect growth momentum to continue. Traction on B2C portfolio has already been good. Pick up in the B2B segment, which may gain further momentum is the second half, is also to be good revenue and earnings driver.

Analysts at Yes Securities said the stock is currently trading at 23 times FY23E earnings and 14x EV/Ebitda. They remain positive on the stock and it is their top pick in the consumer electricals space. Given the strength in the balance sheet, improvement in working capital and faster growth in B2C business, the stock should continue on its re-rating journey, they add.