Buy Polycab India Ltd For Target Rs. 7,152 By PL Capital
W&C growth on track, FEMG turns EBIT Positive
Quick Pointers:
* W&C business reported 22.1% revenue growth in Q4FY25
* EBITDA margin expanded by 110bps; W&C EBIT margin contracted 20bps YoY
Polycab reported mid teen volume growth in its W&C segment. Domestic W&C business grew by 26.5% YoY, driven by mid-teen volume growth. Within this, domestic cables grew at a faster pace in the high teens, while wires registered high single-digit growth. Polycab holds 27% market share in domestic organized Wires & Cables industry. However, the company's international business declined by 23.6% YoY in Q4FY25 due to rollover of a large order into Q1FY26. contribution of exports to total revenue stood at 4.7%/6% in Q4FY25/FY25 and company aims to increase its export contribution to 10% by leveraging strong order book execution across the Middle East, Europe, and Australia. Its FMEG segment turned EBIT positive after ten successive quarters of strategic investment in talent, product innovation and brand building. Company has successfully surpassed its revenue guidance of Rs 200bn under project LEAP in FY25 a year ahead of schedule and now aims to achieve 1.5xsector growth in volume and target EBITDA margin at 11-13% over the next 5 years through its Project Spring, aiming for Rs400-500bn revenue during this period. We expect revenue/EBITDA/PAT CAGR of 15.9%/16.2%/15.3% over FY25-27E. We maintain ‘BUY’ rating, with TP of Rs7,152 (same as earlier) valuing at SOTP, implying PE of 40x FY27E.
W&C grew by 22.1% YoY, domestic business grew 26.5%: W&C business reported revenue growth of 22.1% YoY in Q4FY25 and 17.6% FY25, cables growth outpaced wires business in this quarter. Emerging sectors like data centers, EVs, aerospace, defense, and exploration have collectively created substantial opportunities for the domestic W&C industry. The company remains a leader in the manufacturing of W&C in India with a market share of 27% in domestic organized W&C industry. In case of international business, the US, Europe, Australia, and the Middle East are the key contributors, while other regions continue to exhibit strong demand. The company now exports to 84 countries and plans to add more countries to expand revenue and minimize revenue concentration risk. International business revenue accounted for 4.7% of the consolidated revenue for the quarter and 6.0% for FY25.
Sales grew 24.9%, PAT up 33.1%: Sales grew 24.9% YoY to Rs69.9bn (PLe: Rs66.7bn). W&C business grew 22.3% YoY to Rs60.2bn (PLe: Rs56.8bn). Export revenue declined by 24% YoY and contributed 4.7% to total sales. Gross margins expanded by 20bps YoY to 25.5% (PLe: 25.1%). EBITDA grew by 34.6% YoY to Rs10.3bn (PLe: Rs9.3bn). EBITDA margin expanded by 110bps YoY to 14.7% (PLe: 13.9%) due to FEMG segment which turned EBIT positive and better margins in EPC segment . PAT grew by 33.1% YoY to Rs7.3bn (PLe: Rs6.5bn). W&C EBIT grew by 20.3% YoY to Rs8.9bn and margins contracted by 20bps YoY to 15.1%. FMEG revenue grew 32.7% YoY to Rs4.7bn, and reported positive EBIT of Rs23mn vs loss of Rs458mn in Q4FY24.
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