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Strong domestic C&W; FMEG momentum continues Wires outpace cables; price revision follows gradual volume recovery

* Polycab (POLYCAB)’s 1QFY27 revenue/EBITDA grew ~39%/32% YoY to INR82.1b/INR11.4b (~4%/7% beat). Cable & wire (C&W) revenue increased ~38% YoY to INR72.0b (in line), and FMEG revenue grew ~68% YoY to INR7.6b (~34% beat). OPM dipped 70bp YoY to ~14% due to a decline of 1.4pp in C&W margin to 13.3% (in line). Adj. PAT increased ~32% YoY to INR7.8b (~11% beat, aided by higher-than-estimated other income).

* Management indicated that C&W volumes grew in low-to-mid single digits on a high base of 1QFY26, with wires outpacing cables. The recent correction in copper and aluminum prices led to ~3-4% price revision in the first fortnight, which is expected to translate into volume gradually.

* POLYCAB remains optimistic on the demand outlook for the next 2-3 years, backed by strong underlying growth drivers. The FMEG business continued to outperform, led by broad-based growth across key categories. However, the solar business remained the primary growth driver, with revenue more than doubling YoY.

* We maintain our earnings estimates for FY27/FY28. The stock currently trades at 43x/35x FY27E/FY28E EPS. We value POLYCAB at 45x FY28E EPS to arrive at our TP of INR11,900. Reiterate BUY.

C&W margin down 1.4pp YoY to ~13%; FMEG margin up 5.9pp to ~8%

* Consolidated revenue/EBITDA/PAT stood at INR82.1b/INR11.4b/INR7.8b (+39%/+32%/+32% YoY and +4%/+7%/+11% vs. estimates). Gross margin contracted 3.0pp YoY to 23.8%. OPM dipped 70bp YoY to ~14%. Ad spend accounted for 0.4% of revenue vs. 0.3%/0.6% in 1QFY26/4QFY26.

* Segmental highlights: C&W revenue rose ~38% YoY to INR72.0b, EBIT grew ~25% YoY to INR9.6b, and EBIT margin declined 1.4pp YoY to ~13% (in line). FMEG revenue surged ~68% YoY to INR7.6b and EBIT jumped 6x YoY to INR606m (3x above our estimate). EBIT margin expanded 5.9pp to ~8%. EPC and Others’ revenue increased ~8% YoY to INR2.6b, EBIT surged 2.2x YoY to INR277m, and EBIT margin expanded 5.4pp YoY to 10.6%.

* The balance sheet continues to remain strong with a net cash balance of INR39.9b (post-dividend payout of INR7.1b) vs. INR41.9b as of Mar’26.

Valuation and view

* POLYCAB's 1QFY27 performance was largely in line with our estimates. While the C&W volume growth was below estimates, its margin remained in line. The company surprised us with an exponential growth and margin improvement in the FMEG segment. The domestic demand momentum remains strong, led by power infra, real estate, and industrial segments. Going forward, we believe the export trajectory and commodity price movement remain the key monitorables.

* We estimate a CAGR of 22%/23%/22% in revenue/EBITDA/EPS over FY26-28. We estimate OPM to be at ~14% in FY27/FY28E (an improvement of 10bp/30bp over FY26). Cumulative OCF during FY27-28E is expected to be at INR51.2b vs. INR56.2b during FY25-26. We estimate a cumulative capex of INR26.0b over FY27-28 vs. INR24.5b over FY25-26. The company’s net cash balance is estimated to increase to INR50.0b in FY28 vs. INR41.5b in FY26. We value POLYCAB on 45x FY28E EPS to arrive at a TP of INR11,950. Reiterate BUY.

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