Polycab India Shines in FY23, Poised for Future Growth

Polycab India Ltd, a leading electrical cable and wire manufacturer, has concluded the financial year 2023 on a high note, with its shares reaching a new 52-week high and net profit surging by nearly 52% year-on-year. The impressive results were driven by a healthy performance in the cables & wires segment, which witnessed a substantial rise in Ebit margin.

During the March quarter (Q4FY23), the cables & wires segment exhibited remarkable growth, achieving a year-on-year increase of 286 basis points in its Ebit margin, reaching 14.5%. This remarkable performance has further strengthened Polycab's

position in the industry.

However, as the company moves forward, it faces the prospect of higher advertising and promotion (A&P) expenses, which may impact its earnings growth in FY24. Polycab's management has indicated a significant increase in A&P spending, estimating it to be two to three times higher than the levels in FY23. This strategic decision aligns with the company's plans to relaunch its brand and accelerate growth in its B2C business, which encompasses fast-moving electrical goods (FMEG) and wires.

While the FMEG segment is currently experiencing a weak demand environment, Polycab India remains

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about its cables & wires segment, which is witnessing robust demand. This positive trend is supported by government initiatives and a revival in private capital expenditure. The company's overall Ebitda margin for FY23 showed a substantial year-on-year increase of 276 basis points, attributed to price increases, a favorable product mix, and declining input costs.

Despite the favorable outlook, analysts caution that retaining these margin benefits in the competitive and cyclical cables & wires business could pose a challenge. Additionally, considering the recent surge in Polycab's stock price, which has risen by 32% in

CY23, a significant portion of the market's optimism may already be priced in, potentially limiting near-term upside.

In conclusion, Polycab India's impressive performance in FY23 and its strategic focus on brand relaunch and B2C expansion set the stage for future growth. While the company may face some headwinds due to higher A&P expenses and a weaker FMEG segment, the positive market conditions in the cables & wires segment and the company's strong positioning bode well for its prospects. Investors and industry watchers eagerly await Polycab India's next moves in the evolving electrical manufacturing landscape.