STOCK X-RAY: Polycab India: Robust C&W growth, stellar FMEG show 

MUMBAI, 16 OCTOBER: Polycab India (POLYCAB IN) posted its highest-ever Q2 sales, up 53% YoY, led by C&W and FMEG. C&W grew 47% with wires outperforming cables. Sales growth was driven by elevated copper prices, which rose ~57% YoY, while volume growth stood in mid-to-high single digit despite a high base. Notably, FMEG sales more than doubled, up 120% YoY, led by multi-fold growth in solar inverters and a richer premium mix of other FMEG products, with FMEG EBIT margin crossing double-digits for the first time. However, EBITDA margin fell 140bps YoY due to lag in price hikes. We reiterate Accumulate with a lower TP of INR 9,190 on 30x September 2028E P/E due to rising competitive intensity as Ultratech enters the market from Q3FY27. However, we remain positive on POLYCAB led by robust domestic C&W demand, higher ASP from elevated copper prices, a strong lead over the No. 2 C&W firm in sales, a large capex plan to enable growth, and FMEG scale-up with improving profitability.

C&W surged on elevated copper prices: C&W sales grew 47% YoY to INR 84bn. Growth was driven by price revisions, which rose ~57% YoY. Volume growth stayed in mid-to-high single digit YoY on a high base, with wires growth in early double digits and cables in mid-single digit. Domestic C&W sales jumped 50% YoY. Exports recovered, up 17% YoY after a 13% YoY fall in Q1. Wires outperformed cables for second quarter. Distribution-driven sales outgrew institutional sales in the quarter, with West India leading, followed by South, North and East.

FMEG crossed double-digit margin; solar leads the pack: FMEG sales more than doubled, up 2.2x YoY to INR 9.9bn. Solar inverters, the largest category, witnessed multi-fold growth, led by PM Surya Ghar Scheme and state-level programs. Other FMEG products continued to grow faster than the industry. Per management, this was the seventh straight profitable quarter for this segment. Premiumization trend continued with premium mix at 33% for fans and 38% for lighting. FMEG EBIT margin crossed double digits for the first time at 10.1%. Management continues to guide FMEG growth at 1.5-2x the industry.

Margin dips YoY on high base: EBITDA rose 39% YoY to INR 14.2bn. EBITDA margin fell 140bps YoY against a high base of 15.8%. Segment-wise, C&W EBIT margin fell 90bps YoY to 14.2%. FMEG margin jumped 960bps YoY to 10.1%. EPC margin fell 1,090bps YoY to 7.2% on a high base.

Reiterate Accumulate with a lower TP of INR 9,190: We raise our EPS by 5% for FY27E, 6% for FY28E and 6% for FY29E. This reflects higher copper prices in C&W, and a sharp increase in FMEG scale. However, we cut our TP to INR 9,190 from INR 9,490 on 30x (from 34x) September 2028E P/E, given higher competition post launch by Ultratech and delay in EHV plant commissioning to FY28. Retain Accumulate given sustained market share of 30-31% in organized C&W, a strong lead over the no. 2 C&W firm in sales, industry-leading margins, large capex to drive growth, and entry into EHV and OFC cables. Expect an earnings CAGR of 22% in FY26-29E, with average RoE and RoCE of 25% and 26% in FY27E-29E. Risks are margin reduction due to increased competition as Ultratech enters the market in Q3FY27.

Report by: Harshit Kapadia, ELARA CAPITAL

(Disclaimer: The information provided here is investment advice only. Investing in the markets is subject to risks and please consult your advisor before investing)

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