Polycab India Ltd. got a ‘buy’ rating after Goldman Sachs initiated coverage on the company on the expectation of high growth in the medium term.
The brokerage has set a target price of Rs 5,750 apiece, implying an upside return potential of 8.2%, as it sees multiple levers to build on an already dominant market position.
“We believe that it is fair to look at Polycab as a FMEG company—which benefits from India’s infrastructure, housing, power and also from growth in consumption—and that it will maintain a high growth rate in the medium term,” Goldman Sachs said in its Nov. 21 note.
The brokerage expects revenue growth of 15% CAGR over FY24–27E. Significant cash generation over FY24–27E (free cash flow to sales at 5%) improves growth visibility through re-investment, it said.
Polycab India will outperform its peers in cables and wires, as its superior growth in the near term and increasing presence in adjacent electrical areas can continue to drive a premium valuation, Goldman Sachs said. The brokerage’s bull case shows an upside of 30%.
“Our above-consensus revenue forecasts in the cables and wires business reflect its strong industry position,” it said.
The stock has outperformed Sensex so far this year. It has risen 107.58% on a year-to-date basis, compared to an 8% rise in the Sensex.
