Buy Polycab India Ltd For Target Rs.10,764 by Prabhudas Liladhar Capital Ltd
Steady growth backed by domestic demand
Wires & Cables (W&C) segment delivered a healthy performance in Q1FY27, with domestic W&C revenue growing 42.8% YoY, while the overall W&C segment grew 39.0% YoY, supported by healthy domestic demand, robust execution, and favourable commodity-linked realizations. Wires outperformed cables during the quarter, while channel sales grew faster than institutional sales. Volume growth remained in the lowto-mid single digits on a high base, with pricing supported by higher commodity realizations. The international business declined 13.0% YoY due to geopolitical disruptions. EBIT margin for the W&C segment improved sequentially to 13.3%, driven by a favourable business mix and continued operational efficiencies, while the company maintained its EBIT margin guidance of 11-13%.
The FMEG segment delivered another healthy quarter with 71.0% YoY growth and EBIT margin improving to 8.0%(+580bps), supported by operating leverage and increasing premium products mix. Solar products remained the primary growth driver with more than 2x YoY growth and continued to be the largest category within the FMEG portfolio.
Management remained positive on the medium-term demand outlook, driven by investments in T&D, renewables, manufacturing, railways, logistics, data centers, defense, EV charging infrastructure and private capex. We expect revenue/EBITDA/PAT CAGR of 22.6%/23.0%/22.9% over FY26-28E. We upward revise our FY27/FY28 earnings estimates by 1.8%/2.1% factoring strong demand from domestic markets. We assign a SOTP-based target price of INR10,764 (earlier INR10,503), based on 40x FY28E P/E, and upgrade the stock to “BUY” from “Accumulate”, due to recent correction in the stock price and earnings upgrade.
Q1FY27 financial performance:
Sales grew 39.0% YoY to INR 82.1bn (PLe: INR 78.4bn). W&C business grew 39.4% YoY to INR 71.6bn. International business declined by 12.7% YoY. Gross margins contracted by 300bps YoY to 23.8% (PLe: 25.6%). EBITDA grew by 32.5% YoY to INR 11.4bn (PLe: INR 10.7bn). EBITDA margin contracted by 70bps YoY to 13.8% (PLe: 13.7%). PAT grew by 32.5% YoY to INR 7.8bn (PLe: INR 7.1bn). W&C EBIT grew by 26.4% YoY to INR 9.5bn and margins contracted by 140bps YoY to 13.3%. FMEG revenue grew by 70.7% YoY to INR 7.6bn and reported EBIT of INR 606mn vs INR 96mn in Q1FY26. EPC revenues declined by 11.4% YoY to INR 3.1bn and EBIT grew by 26.4% YoY to INR 338mn and EBIT margin expanded by 330bps YoY to 11.0%
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