- 19 Oct 2022
- ICICIdirect Research
Polycab reports strong performance led by core segmentPOLYCAB - 2819 Change: -42.10 (-1.47 %)
Polycab's consolidated revenue increased ~11% YoY at ~~Rs 3332.4 crore led by ~12% growth in revenues of wires & cables business to Rs 2951.7 crore. The FMEG segment revenue declined 11% YoY to Rs 305.4 crore. Gross margin increased ~418 bps YoY (110 bps QoQ) mainly led by softening of raw material prices and price hikes. PAT came in at Rs 270.5 crore, up ~35% YoY tracking strong topline growth in Q2FY23 and recovery in EBITDA margin.
We believe the revenue growth in Q2FY23 was driven by the wire & cable business, supported by an uptick in exports and robust institutional demand. On a favourable base, exports increased 75% YoY and now accounts for 13% of total revenue. The FMEG division of Polycab's business saw a decline due to sluggish demand. Seasonality, inflationary conditions and implementation of the new BEE regulations impacted the demand for fans. The gross margin improved as a result of price increases and a change in product mix, which contributed to the overall recovery of EBITDA margin to its pre-Covid level. Although we remain positive on the stock, we await management commentary on the future demand outlook.