Prestige Estates, Polycab India hit 52-week high in subdued market

Shares of Prestige Estates and Polycab India hit their respective 52-week highs on Tuesday in an otherwise weak market. These stocks were trading higher in the range of 3 per cent to 7 per cent, as compared to around half a per cent decline in the S&P BSE Sensex in the afternoon deals.

Shares of Prestige Estates Projects, the real estate developer, were up for the fifth straight trading day, up 7 per cent at Rs 345 on Tuesday on optimisation of the strong pipeline of rental assets yielding growth in rentable income. The stock was trading close to its all-time high of Rs 356, touched on January 2018.

Prestige Estates had reported a strong set of numbers for July-September quarter (Q2FY20), with profit before tax (PBT) jumping 50 per cent year-on-year (YoY) to Rs 230 crore. Revenue grew 48 per cent to Rs 1,923 crore and EBITDA margin expanded by 350 basis points (bps) to 31.7 per cent YoY.

“We remain optimistic on Prestige Estates considering its attractive valuation, which is supported by a strong portfolio of operational rental assets, thereby reducing the risks associated with residential segment, and a planned increase in commercial and retail properties over the next five to seven years,” analysts at Nirmal Bang Equities said in a result update.

Despite an encouraging quarter on collections and pre-sales, Prestige Estates has seen further debt built up, posing a challenge for the management in achieving optimal leverage (target D/E of 1.4 by FY20E). One of the few positives is that around 64 per cent of debt is backed either by annuity or by rental securitisation/ bill discounting. The company continues to look at opportunities for monetization of its retail/hospitality assets and update on the same (expected in 3QFY20) would provide a re-rating trigger, said analysts at HDFC Securities.

Meanwhile, Polycab India hit a new high of Rs 967, up 3 per cent, surging 43 per cent in the past two months on the back of strong Q2 results. The stock of the fast moving electric goods (FMEG) company surpassed its previous high of Rs 956 touched on November 22, in the intra-day trade.

In Q2FY20, Polycab’s net profit more-than-doubled to Rs 194 crore, on the back of strong revenue growth. It had logged profit of Rs 90 crore in the year-ago quarter. The bottom-line got an additional boost on the back of lower tax rates due to re-measuring of deferred tax assets/liabilities. The company’s revenue during the quarter grew 24 per cent YoY to Rs 2,242 crore, driven by strong growth across segments.

Brokerage firm Sharekhan maintains ‘positive’ view on Polycab India with a potential upside of 12-15 per cent. The cables and wires segment is expected to outpace the industry’s growth rate of 14-15 per cent, led by increasing distribution reach and diverse product and sector applications.

The FMEG segment is expected to maintain strong revenue growth trajectory, led by leveraging distribution strength and launch of new products within existing categories. Rising cash flows with each passing year may lead to upward revision in capital expenditure along with probability of higher shareholder returns through dividends, the brokerage firm said in a client note.