Polycab IPO recommendations dotted with subscribe calls

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Last updated on January 12, 2020

Mumbai-based wire and cable manufacturer Polycab has launched its maiden public offer in the price range of INR533-538 per share. Promoted by Inder Jaisinghani, Ajay Jaisinghani, Ramesh Jaisinghani and Girdhari Jaisinghani, the company has a market share of approximately 18% of the organized wires and cables industry in India. Owing to attractive valuations, the IPO has received positive ratings from analysts at brokerage houses. Here is a ready reckoner of Polycab IPO recommendations:

First off, Angel Broking has put a subscribe recommendation on Polycab IPO citing several positive factors. โ€œIn terms of valuations, the pre-issue P/E works out to 16.7x its FY2019 annualized earnings (at the upper end of the issue price band), which is slightly lower compared to its peers like Finolex Cables (20.7x) & Kei Industries (20.x). Further, Polycabโ€™s market leadership position in wires & cables segment, diversified product portfolio, strong distribution network & brand recall and proven financial track record are the key positives. Given the above favorable factors, we recommend Subscribe to issue,โ€ the brokerage house said in its review note for the IPO.

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ICICIdirect also sounded a positive note about the prospects and valuations of the company. โ€œAt the IPO price band of INR533-538, the stock is available at a price to earnings multiple of 22x FY18 EPS. We believe the issue is available at attractive valuation, considering its leadership position in the wire & cable industry, low debt/equity (~0.3x) and attractive return ratios (RoCE ~21%, RoE ~16%). We recommend SUBSCRIBE to the issue at the offer price,โ€ noted analysts Sanjay Manyal and Hitesh Taunk.

โ€œGiven the brand position, financials and business prospects, we suggest investors can subscribe to the issue,โ€ said Mrinalini Chetty of Centrum Wealth while adding that a strong brand portfolio and distribution network could bode well for Polycabโ€™s new product launches and expansion of FMEG business.

Read Also: Polycab IPO Analysis: Should you subscribe?

Choice Broking cited strong distribution network and manufacturing facilities with high degree of backward integration as key strengths for the company. โ€œComing to the valuation, based on the higher price band, PIL is demanding a P/E valuation of 14.6x (to its TTM EPS of Rs. 36.8), which is at a discount to its peer average of 20.1x. Based on FY19E and FY20E EPS, the stock is valued at P/E multiple of 17.2x and 13.8x, respectively, which again is available at discount to peer average. Thus, considering the above observations we feel that the issue is reasonably priced, thereby providing a โ€œSUBSCRIBEโ€ rating,โ€ said the brokerage house in its IPO note.

Anand Rathi also joined the brokerage houses in issuing positive Polycab IPO recommendations and stated that Polycab has a healthy product mix catering to a diverse customer base. The company has significant opportunity to grow further on favorable macro traits including Governmentโ€™s focus on electrification, infrastructure and housing and improving lifestyle along with consumer spending. โ€œConsidering several positive factors such as a market leadership position, diverse portfolio, strong distribution network and favorable macro scenario, we recommend subscribe to this IPO,โ€ opined analyst Anindita Chaudhury.

Read Also: All about Polycab IPO

Motilal Oswalโ€™s IPO note was also bullish, stating that the companyโ€™s healthy financials. โ€œAt the upper price band, Polycab is valued at 16.8x P/E on FY19 annualized basis, compared to KEI Industries 18.4x P/E (MOSL estimates) and Finolex Cables 17.2x P/E FY19E (Bloomberg estimates). Given the strong industry growth trends, leadership position, healthy financials and comfortable valuations, we are positive on the IPO. Hence recommend SUBSCRIBE,โ€ noted the IPO recommendation.

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