Earnings Outlook
Wires and cables segment to drive Polycab India in Oct-Dec
This story was originally published at 23:28 IST on 21 January 2025
Register to read our real-time news.Informist, Tuesday, Jan. 21, 2025
By Aman Aryan
MUMBAI – Electrical equipment company Polycab India Ltd. will likely post a second consecutive quarter of on-year growth in its consolidated net profit for the December quarter owing to strong demand for wires and cables.
At a time when almost every sector is grappling with a slowdown in capital expenditure, Polycab India is expected to reap some benefits from higher orders in the transmission and distribution segment.
Apart from robust demand in the cable and wire segment, rising localisation trends in the electronics industry and increased exports would have likely driven Polycab India's growth in the December quarter. At INR 4.58 billion, the company is expected to post its highest consolidated net profit in the past five years for the December quarter, an increase of 11% on year, according to the average of estimates from nine brokerage firms.
After a low order tendering by the government in the first half of the current financial year due to the general elections, demand would have likely picked up in the third quarter, analysts said. The company is expected to post a 24% on-year growth in its consolidated revenue for the December quarter to INR 53.61 billion, according to the average of estimates from nine brokerage firms. Sequentially, the company is expected to post a 4% growth in its consolidated net profit but a 3?ll in consolidated revenue for the quarter.
Estimates for the consolidated net profit range from INR 4.29 billion by Systematix Share and Stocks (India) Ltd. to INR 4.76 billion by Anand Rathi Share and Stock Brokers Ltd. Robust demand for wires and cables would have likely driven the company's earnings for the December quarter, Anand Rathi said. However, Kotak Institutional Equities said demand for wires would have likely been impacted due to overstocking in September. Estimates for the company's consolidated revenue range from INR 51.10 billion by Prabhudas Lilladher Pvt. Ltd. to INR 55.68 billion by Kotak Equities.
The company's fast-moving electronic goods segment is expected to grow 30% on year as price erosion for fans and lighting products reduced significantly in the latest quarter, Kotak Equities said. The company's 'others' segment, which mainly comprises its engineering, procurement, and construction business, is expected to grow 135% on year owing to the government's Revamped Distribution Sector Scheme, the brokerage said. The scheme aims to cut the aggregate technical and commercial losses by 12-15% and reduce the gap between average cost of supply and average revenue realised to zero by 2024-25.
The earnings before interest and tax margin of the company's wire and cable segment is usually better in the second half of a financial year, Kotak Equities said as it estimated the segment's EBIT margin for the December quarter will expand 75 basis points sequentially, but contract 100 bps on year to 13%. Polycab India's fast-moving electronic goods and others segments are expected to report EBIT margin of (-)5% and 11.5%, respectively, the brokerage said.
The electrical equipment maker will likely report earnings before interest, tax, depreciation, and amortisation of INR 6.59 billion for the December quarter, according to the average of estimates from seven brokerage firms. For the September quarter, the company's EBITDA grew 4% on year to INR 6.32 billion, but the EBITDA margin contracted 290 bps to 11.5%.
Of the 14 brokerage reports on the company available with Informist, nine have a 'buy' or equivalent rating and five have a 'hold' or equivalent rating. On Tuesday, shares of Polycab India closed at INR 6,559.65 on the National Stock Exchange, down 3.6%. The stock is down 7.9% from the closing price on Oct. 18, a day after the company had detailed its previous quarter earnings after market hours. Polycab India is scheduled to report its earnings for the December quarter on Wednesday.
Following are the Oct-Dec earnings estimates for Polycab India Ltd. based on reports compiled by Informist from nine brokerages in descending order by the estimate of net profit:
|
Brokerage Firm |
Net Sales |
Net Profit |
EBITDA |
|
----(in INR million)------ |
|||
|
Anand Rathi Share and Stock Brokers Ltd. |
53,302.00 |
4,762.00 |
-- |
|
Kotak Institutional Equities |
55,683.00 |
4,750.00 |
7,050.00 |
|
Sharekhan Ltd. |
55,000.00 |
4,680.00 |
-- |
|
Elara Securities (India) Pvt. Ltd. |
54,471.00 |
4,617.00 |
6,556.00 |
|
Motilal Oswal Financial Services Ltd. |
53,165.00 |
4,609.00 |
6,587.00 |
|
Nirmal Bang Equities Pvt. Ltd. |
53,000.00 |
4,589.00 |
6,700.00 |
|
Prabhudas Lilladher Pvt. Ltd. |
51,098.00 |
4,508.00 |
6,622.00 |
|
Nuvama Wealth Management Ltd. |
53,864.00 |
4,461.00 |
6,245.00 |
|
Systematix Shares and Stocks (India) Ltd. |
52,902.00 |
4,285.00 |
6,357.00 |
|
Average |
53,609.44 |
4,584.56 |
6,588.14 |
End
Edited by Ashish Shirke
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