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Strong beat on healthy domestic demand and FMEG growth 2HFY27 outlook remains strong; limited channel inventory buildup

* Polycab’s revenue/EBITDA grew ~53%/44% YoY to INR98.9b/INR14.2b (15%/16% beat) in 2QFY27. Cable & wire (C&W) revenue rose ~47% YoY to INR83.8b (~9% beat), and FMEG revenue jumped 2.2x YoY to INR9.9b (42% beat). OPM dipped 90bp YoY to ~14.4% due to a decline of 90bp in C&W margin to 14.2% (+90bp vs. estimate). Adj. PAT increased ~48% YoY to INR9.8b (~22% beat), aided by higher-than-estimated other income.

* Domestic C&W revenues grew at 50% YoY; while; international business recorded 17% YoY growth. Volume growth was in the mid-to-high single digits with wire growth outpacing cable growth. Management expects healthy C&W demand to remain intact in 2HFY27. FMEG continued to outperform, led by solar inverters, with margins in double digits for the first time.

* We increase our EPS estimates by ~9%/4% for FY27/FY28 on strong earnings beat. The stock trades at 34x/31x FY27E/FY28E EPS. We value Polycab at 40x FY28E EPS to arrive at our TP of INR10,600. Reiterate BUY

C&W margin down 90bp YoY to ~14%; FMEG margin up 9.6pp to ~10%

* Consolidated revenue/EBITDA/PAT stood at INR98.9b/INR14.2b/INR9.8b (+53%/+44%/+48% YoY and +15%/+16%/+22% vs. estimates). Gross margin dipped 3.5pp YoY to 23.6%. OPM fell 90bp YoY to 14.4%. Ad spend accounted for 0.4% of revenue vs. 0.5%/0.4% in 2QFY26/1QFY27.

* Segmental highlights: C&W revenue rose ~47% YoY to INR83.8b, EBIT grew 38% YoY to INR11.9b, and EBIT margin declined 90bp YoY to 14.2% (+90bp vs. estimate). FMEG revenue surged 2.2x YoY to INR9.9b and EBIT jumped 46x YoY to INR1.0b. EBIT margin expanded 9.6pp to 10.1%. EPC and Others’ revenue rose 61% YoY to INR5.4b, EBIT grew ~8% YoY to INR339m, and EBIT margin declined 3.1pp YoY to 6.3%.

* In 1HFY27, revenue/EBITDA/PAT grew 46%/39%/41% YoY to INR181.1b/ INR25.6b/INR17.6b. OPM declined 80bp YoY. OCF stood at INR16.7b vs. INR17.9b in 1HFY26 due to INR6.0b increase in working capital. Capex stood at INR6.0b vs. INR7.5b in 1HFY26. FCF stood at INR10.7b vs. INR10.4b in 1HFY26.

Key highlights from the management commentary

* C&W revenue grew significantly YoY, with domestic revenue up ~50%, driven by healthy demand, strong channel execution and favorable commodity-linked realizations.

* It expects C&W to grow at 1.5x the industry growth rate in the long term and expects healthy demand to continue in 2H. There was no significant increase in channel inventory or major change in demand due to commodity-price movements.

* Under Project Spring, it aims to grow FMEG revenues at 1.5x-2x of industry growth, with FY30 EBITDA margin target of 8-10%. 2Q was the 7 th profitable quarter in a row.

Valuation and view

* Polycab’s 2QFY27 performance exceeded our estimates across segments. C&W segment continued its strong growth momentum supported by RM prices and higher growth for wires. FMEG also delivered robust revenue and profit growth. Domestic demand remains healthy, supported by power infrastructure, real estate and industrial activity. Going forward, export growth and commodity price movements remain key monitorables.

* We estimate a CAGR of 24%/24%/23% in revenue/EBITDA/EPS over FY26-28. We estimate OPM to be at ~14% in FY27/FY28E. During FY27-28E, cumulative OCF is expected to be at INR72.8b vs. INR56.2b during FY25-26. We estimate a cumulative capex of INR26.0b over FY27-28E vs. INR24.5b over FY25-26. The company’s net cash balance is estimated to increase to INR71.3b in FY28E vs. INR41.5b in FY26. The stock trades at 34x/31x FY27E/FY28E EPS. We value Polycab at 40x FY28E EPS to arrive at a TP of INR10,600. Reiterate BUY.

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