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Polycab India Ltd. reported strong revenues in Q2 FY23 in-spite of price corrections in its cables and wires business (three-year compound annual growth rate: 15.4%).
Steep inflation led revenue decline of fast moving electrical goods segment. While carry-over of pricing actions and correction in raw material prices led to recovery in Ebitda margin (expanded 309 basis points YoY), Ebit margin of FMEG segment was lower due to likely higher trade and brand building investments.
We revise our earnings estimates to factor-in Q2 FY23 and model Polycab to report revenue and profit after tax CAGRs of 15.2% and 28% over FY22-FY24E.
We remain structurally positive on Polycab due to its competitive advantages and growth opportunity in consumer durables. However, we see limited stock price upside at current valuations (29 times FY24E).
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