Polycab India shares: Jefferies' target at Rs 7,000! What broker says on IT raids, Q3 results

Polycab India shares: Jefferies’ target at Rs 7,000! What broker says on IT raids, Q3 results

Jefferies in its latest note suggested a base case share price target of Rs 7,000 on Polycab India Ltd, while saying it would await further clarity on the alleged tax evasion issue. The foreign brokerage highlighted various instances of similar income tax department searches at Mankind Pharma in May 2023, Shree Cement Ltd in June 2023, Hero MotoCorp Ltd in August 2023 (Enforcement Directorate searches at company’s offices and executive chairman’s residence), Havells India in November 2023 (searches by Directorate of Revenue Intelligence) and RR Kabel Ltd in the same month.

The nature of regulatory developments might differ across each of the companies but, post initial hiccups, share prices of most companies have largely recovered, likely driven by business performance, Jefferies said.

“While we currently rate Polycab as a Buy, we await further clarity on this issue. The company reports Q3Y24 result on January 18, 2024. In Q3, average copper price has risen by 2 per cent YoY; Given its pass-through impact, we estimate sales to grow 15 per cent YoY. operating profit margin is estimated  to expand 40 bps YoY, aided by op-leverage from C&W volumes and softening commodities in FMEG,” Jefferies said.

Jefferies said its base case target of Rs 7,000 factors in Cables & Wires revenue of 21 per cent compounded annually over FY23-26, primarily led by expected capex revival, infra development, and housing upcycle in India. It said its target PE is at a premium to historical 3-year average, in view of the company’s ramp-up in FMEG, expected housing and capex revival in India, and benefits from strategic initiatives.

Jefferies suggest a downside scenario of Rs 3,000 for the stock and a upside scenario target of Rs 8,000 on the scrip. Polycab India shares are down 30 per cent in the past few trading sessions on concerns of alleged tax evasion but Polycab India has so far reiterated that it had not received any written communication from the income tax department regarding the outcome of December search operation.

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