Polycab is the largest manufacturer of cables & wires in India and has successfully entered FMEG space too.

Rationale:

  1. The company posted H1FY20 revenue of Rs.41.9 billion recording a 20% YoY growth driven by 14% YoY growth in wires and cables & 52% YoY growth in FMEG coupled with increase in exports too.
  2. Polycab has increased its efforts in distribution reach, new product development and advertising. Net working capital days were at 46 days in 2QFY20 as compared to 65 in FY19 signalling further room for improvement.
  3. Channel financing in the cables and wires business currently has ~60% coverage while that in the FMEG business is ~10-15% with significant scope for expansion. The company is also engaging with an external consultant to improve inventory levels.

Valuation and View: At 20x FY20 P/E, the stock is trading at reasonable valuations. It is a preferred play in the electricals space in India.

Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.

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