Polycab posted blockbuster Q4-2024 results on 10th May. The company reported 18039 crores of topline and 1803 crores of PAT for full year 2024; the topline was 28% and PAT was 41% higher compared to previous year. For the Q4-2024, topline was 5592 (29% yoy growth) crores and PAT was 553 crores (29% yoy growth). Following are some key call outs & observations from the earnings call
1- The Company is going to achieve the project LEAP topline target of 20K crores ahead of FY2026. The company would come up with a new guidance for the medium term in next few quarters.
2- While the Copper and Aluminium prices have gone up, the company believes that it has robust processes/mechanism in place to protect its margins and so does not see it impacting the profitability.
3- The cables and wires business is growing at a much faster clip – north of 30%. Cables are growing at high thirties and wires at low thirties. The company believes that it has gained the market share from other players and now it has 25% odd share compared to 23% odd a year ago.
4- The demand scenario for the cables and wires is robust, and company believes that with huge impetus from government on Infra it would remain so over the next few years.
5- FMEG continues to be lacklustre. While there is yoy growth in topline, it has come on low base. Also there were couple of one-time expenses which has impacted the profitability of this arm.
6- Polycab is actively working on fixing the identified gaps in FMEG, and expects things to improve in next 2-3 quarters. More focus on Switchgears where margins are better.
7- Exports grew fine except for US where the company is changing the mode of business to distributor oriented (as it is in India). This will make the growth in export look modest for the current year. Expect that all other countries (79 in number) will make up for the moderation brought from US in next couple of years.
8- NOT A SINGLE question asked by analysts on the IT raid. The promoter just said in the beginning that they have been providing all info to the IT department and they do not believe that there would be any material impact.
9- The overall EBITDA margin for the business would be in 12-13% range. For EPC it would be in high single digits.
10- Capex of roughly 1000-1200 crores every year over the next 2-3 years.
11- Polycab is the undisputed leader in cables and wires in India from Sales, growth and profitability point of views. It is far ahead of KEI and Havells in this segment. The tone in the earnings call was upbeat – the management gave enough pointers which leads one to expect the growth momentum to continue – revision in LEAP target, talking about public and private spend on Infra (Renewable – 500 GW, Underground cabling, spends on highways and railways etc.)
12- I expect Polycab to achieve 20% topline growth in FY 2024-25. There are multiple reasons behind this optimism – first, many avenues of growth from Infra push from the government resulting in huge demand for cables and wires. Second, Polycab was operating at 75% odd capacity in this year and so there is capacity available for further growth. Third, the company has demonstrated best in class execution over the years and it is reasonable to believe that it will be able to execute well soon too.
13- With 20% topline growth, and roughly 13 – 13.5% EBITDA and 10% PAT margin, the company should post 2165 crores of profit for FY 2024-25. This will result in EPS of roughly 142. The current market price is discounting this roughly 43 times. I will let all of you do the comparison with KEI and Havells.
14- I request my fellow investors to process the corporate presentation (this is different from earnings presentation) of Polycab. It has plenty of insights for cables and wires business and in general for Power (Renewables, Transmission and Distribution and many more).
I am small retail investor who knows very little. I go wrong with my interpretations and understandings very often. Thank you for reading.
Krishna
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