Polycab Share Price: After 106% gains in 2023 so far, Goldman Sachs highlights four key growth levers

Shares of electronic equipment producer and distributor Polycab India Ltd. have opened higher on Wednesday after brokerage firm Goldman Sachs initiated coverage on the stock with a "buy" rating.

Goldman Sachs has a price target of ₹5,750 on the stock, which implies a potential upside of 9% from current levels. Polycab's shares have already surged 110% so far in 2023. This is the second best annual performance for the stock since its listing in 2019. The stock had gained 138% in 2021.

Goldman Sachs believes that Polycab has multiple levers to build on an already dominant market position.

The company, according to Goldman Sachs, has a long runway for growth. It has highlighted four key factors for the same:

the Cables & Wires industry is expected to grow at a Compounded Annual Growth Rate (CAGR) 0of 13% over the next five years.

Second, the 12,000 SKUs that the company has allows for sizeable presence. An SKU or a Stock-Keeping Unit is a scannable bar code, most often seen printed on product labels in a retail store.

Third, the company has also made its maiden investment in the Extra High Voltage (EHV) segment, and

Four, the FMEG business may become an added growth lever in the long term.

For the September quarter though, Polycab's FMEG losses expanded due to higher advertising spends. In an interaction with CNBC-TV18, the company said that it plans to achieve revenue of ₹20,000 crore by financial year 2026.

The management also said that it plans to increase capacity by an additional 25% to 30%.

Out of the 31 analysts that track Polycab, 19 of them have a "buy" recommendation, while six analysts each have a "hold" and "sell" rating respectively.

Additionally, Goldman Sachs has also initiated coverage on Polycab's peer KEI Industries but with a "neutral" rating and a price target of ₹2,730. 

The brokerage said that while KEI is well placed for growth, it is constrained by capacity.

Being one of the few companies with an Extra High Voltage (EHV) offerings, increased focus on exports, upcoming expansion, which will help de-bottleneck capacity and increased focus on retail keeps the company well placed for growth, according to Goldman Sachs.

11 out of the 16 analysts that track KEI Industries have a "buy" recommendation on the stock, while the others have a "hold" rating.

Shares of Polycab are off the opening highs, currently trading 0.8% higher at 5,350, while those of KEI are trading 1.5% lower at 2,919.95.