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Revenue rose 12% YoY to INR 27988 mn for the quarter with C&W revenue growing 11% to INR 24073 mn & FMEG revenue growing 41% to INR 3055mn. B2C businesses (Domestic wires & FMEG) witnessed encouraging growth reaching ~ 40% of total revenue whereas B2B business of cables continued to remain laggard. Exports contributed 10% to top line despite higher base of Dangote order in the base quarter. Receivable days reduced driven by the company resorting more & more to channel financing in FMEG business. Gross margins dipped 320bps to 24.3% due to unprecedented increase in input costs, primarily copper & aluminium (up 15% YoY). Though company undertook pricing action, the same was not enough to recoup input cost increase completely. However, EBITDA margin remained stable at 13.4% aided by very good control over operational overheads. A&SP spend remained stable at INR 372mn. Management is working on Vision 2025 & will share revenue as well as profitability targets by FY21 end with Investor fraternity. Net profit stood at INR 2638 mn, up 19% YoY led by substantial improvement in profitability of FMEG SBU to 6%, up 540bps and that of C&W SBU rising 90bps to 12.8%.

B2C businesses drives revenue

Revenue rose 12% YoY to INR 27988 mn for the quarter driven by B2C businesses. Domestic wires & FMEG businesses constituting B2C businesses witnessed encouraging growth with their contribution to revenue reaching ~ 40% of revenue compared to 30% a year ago. C&W rose 11% to INR 24073 mn & FMEG revenue rose 41% to INR 3055mn.Exports contributed 10% to topline despite higher base of Dangote order in the base quarter.

EBITDA margin stable despite 320 bps drop in Gross Margins

EBITDA margin remained stable at 13.4% despite fall in gross margins aided by very good control over operational overheadsGross margins dipped 320bps to 24.3% due to unprecedented increase in input costs, primarily copper & aluminium (up 15% YoY). Though company undertook pricing action, the same was not enough to recoup input cost increase completely. A&SP spend remained stable at INR 372mn. Net profit stood at INR 2638 mn, up 19% YoY led by substantial improvement in profitability of FMEG SBU to 6%, up 540bps and that of C&W SBUrising 90bps to 12.8%.

Outlook & Valuation:

On the back of Company's operations returning to normalcy, we fine tune our earnings estimates for FY21 & 22&introduce FY23 earnings. We retain BUY on the stock with revised PT of INR 1310 (18x FY22E EPS). Targeted increase in contribution to revenue from B2C business comprising of domestic wires & FMEG to nearly half of the company's revenue over the medium term from present ~ 40% of revenue with focussed marketing initiatives should result into re-rating of multiple to its earning. Polycabis the leader in domestic W&C market with 20% share of organised segments & a debt free company with surplus cash on BS that should enable inorganic growth. Management is working on Vision 2025 & will share revenue as well as profitability targets by FY21 end with Investor fraternity

Key Risks:

* Volatility in raw material prices& FOREX

* Prolonged slowdown in new construction activities

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