Polycab India Sees Stellar Listing, What Should Investors Do Now?

Wires and cables manufacturer Polycab India shares rose nearly 18 percent over its final issue price given strong fundamentals and response to the public offer.

The stock opened at Rs 633 on both exchanges (BSE and NSE) against the offer price of Rs 538 and maintained above Rs 600 at the time of publishing this copy.

It was quoting at Rs 654.75 on the NSE, up 21.7 percent while on the BSE, it was trading higher by 21.77 percent at Rs 655.10 at 1241 hours IST.

After the listing on expected lines, what should investors do with their holding?

Most analysts advised holding the stock for long term considering healthy prospects, strong balance sheet which will be strengthened further after debt repayment by IPO money, revival in the construction industry which will be beneficial as the company has diversified products and strong retail participation.

Here are experts take on the stock after listing:

Laxmi Iyer, Research Analyst at Geojit Financial Services

Polycab is trading at 6 percent and 17 percent premium to its key competitors KEI Industries & Finolex Cables, respectively, given its high scale of operation and profitability which seems reasonable.

Though it is trading at a deep discount to Havells and V-Guard Industries as these players have wider product portfolio and pan India penetration.

Polycab India Ltd, is one of the leading manufacturers of Cables & Wires and is currently trading at an attractive P/E of 20x on FY19 EPS (annualized). We had recommended subscribe on the issue with a medium to long-term view.

Debjit Maji, Research Analyst, Stewart & Mackertich

At the upper band of the issue price, Polycab India looks attractive compared to its peers.

We would like to have a good look at the quarterly numbers post listing to have a clear idea regarding the earnings it can achieve and what can be its probable target price.

At the time of public issue, we had advised subscribing for listing gains as well as long term capital appreciation.

Narendra Solanki, Research Head (Fundamental)- Investment Services, Anand Rathi

Long-term investors could bargain during the day for more shares within these price ranges considering their overall portfolio positions in the segment.

At the upper price band of Rs 538, the IPO is priced at around 17x its FY19 annualized earnings, which is pretty reasonable compared to peers like Havells and KEI Industries.

Prashanth Tapse, AVP Research at Mehta Equities

We believe Polycab has one of the most diversified product portfolios when compared to their peers and it is strongly placed in wires and cables space with healthy market share in the organized space.

A strong brand recall with reasonable valuation proposes a great long term investment opportunity with a target Rs 673, an upside of 25 percent from issue price. Hence we recommend investors to accumulate or hold on to the stock.

Astha Jain, Senior Research Analyst at Hem Securities

Investors should hold the stock for long-term as the company is a market leader in wires and cables in India. It has a diverse suite of electrical products with varied applications across a diverse customer base with a strong distribution network.

Hence, the company’s prospects look strong along with healthy sectoral outlook.

Arafat Saiyed, Research Analyst at Reliance Securities

If stock price falls below Rs 650, it would be a buy. On FY21 earnings, its target price in the medium-to-long term comes to Rs 830.

Phillip Capital

It has initiated coverage on the stock with a buy call and target price at Rs 718, implying 34 percent potential upside from current levels.

With improving cash flows and balance-sheet strength, valuations will trade at a premium with W&C peers (Finolex & KEI), but at a discount to FMEG companies (Havells, V-guard). Higher valuation is mainly due to its market leadership in W&C and transformation into a multiproduct electrical company over the next 24 months.

Funds raised through IPO and operating cash flow of Rs 1,400 crore over FY19-21, will help PIL to pay off debt in 2-3 year, it said.

ROCE is expected to improve to 23 percent in FY21 from 20 percent in FY18.―Money Control