3Q investor call takeaways - Polycab India - YES Securities

FMEG delivers stellar growth, high input cost affects Gross margins

Our View - We believe strong cash generation and sustainable improvement in working capital are key catalysts in multiple re-rating for the stock apart from increasing B2C business. We believe multiple re-rating for Polycab is likely to continue as company is able to deliver sustainable improvement in return ratios with continued market share gains.

Wires and Cables - Grew 6% yoy, domestic wires post double digit growth, while cables business remained flat. Instructional business was muted. Distribution led business continued to see handsome growth. Export business declined on high base of Dangote order. Margins in wires and Cables is likely to remain in range of 11-13%

FMEG - FEMG continued its growth trajectory. It faced high competition, unavailability of product, supply and logistics issues in Q3. Demand of lighting product remained upbeat on back of festive season. Switchgear and switches have seen growth on back of home improvement. FMEG has seen margin improvement on back of change in product mix and cost rationalization. Company is on track to achieve high single digit margin in next 2 years. East has seen higher growth, with market share gains in Fans.

Working capital - Working capital has seen improvement on higher channel financing and increasing in payables. Company is confident of further improving its working capital by reducing inventory levels and keeping payable at optimal level. Reduction in working capital has led to strong cash generation.

Source : Equity Bulls

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