Polycab India Q3 results: Net profit up 15% to Rs 416 crore

Goldman Sachs maintains a ‘buy’ call on Polycab India, awaiting more information on the Income Tax department raid. The target price is Rs 5,750, indicating a 33 percent upside

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Polycab India on January 18 reported a 15.3 percent jump in net profit for the December quarter to Rs 416.51 crore against Rs 361.69 crore a year ago.

Net sales for the quarter stood at Rs 4,340.47 crore, up 16.8 percent from a year ago, the cables and wires maker said in an exchange filing. Total cost jumped 19 percent to Rs 3,865.06 crore.

Wire and cable revenue jumped to Rs 3,900 crore, up 17 percent YoY, while FMEG revenue declined 13 percent from a year ago to Rs 296 crore. Other revenue jumped 97 percent to Rs 248 crore, Polycab India said.

The company said that Income-Tax authorities conducted a search in December 2023 at certain premises, plants, and employee residences and it fully cooperated, providing necessary details, clarifications, and documents.

As of the financial results’ issuance date, no written communication from the department regarding the search outcome has been received. The management, based on available records, believes there is no material adverse impact on the company’s financial position. No material adjustments are deemed necessary for the quarter and nine months ended December 31, 2023, in this regard, it added.

On January 11, the stock plummeted by over 21 percent following an income-tax department announcement of a search on “a cable and wire company” in December, revealing unaccounted cash sales of about Rs 1,000 crore. The stock rebounded by 16 percent after many brokerages maintained a positive stance, increasing the target price.

Goldman Sachs maintains a ‘buy’ call on Polycab India, awaiting more information on the Income Tax department raid. The target price is Rs 5,750, indicating a 33 percent upside. Jefferies also gives a ‘buy’ rating with a target of Rs 7,000 (62 percent upside), anticipating a 15 percent YoY growth in Q3 sales. Both brokerages emphasize waiting for clarity on the tax issue.

Comparing with similar instances in 2023, where companies like Hero Motocorp and Mankind Pharma recovered after Income Tax Department searches, Jefferies notes that Polycab’s correction puts it at a 38 percent discount to peers, offering potential for a rebound. Hero Motocorp shares rallied over 40 percent in the last 6 months, and Mankind Pharma surged over 20 percent.