Buy Polycab India Ltd for the Target Rs.11,950 by Motilal Oswal Financial Services Ltd
Strong growth in C&W; FMEG turned profitable Market share gains and scale strengthen leadership position
Polycab India’s (POLYCAB) market share in the domestic organized C&W segment expanded to ~30%-31% in FY26 from ~18%-19% in FY20, driven by strong demand across power, infrastructure, and real estate. Supported by its scale (nearly twice that of peers), a portfolio of 10,000 SKUs, and a distribution network of over 3,900 dealers and distributors, the company continues to outperform the industry and deepen its presence across key end-markets. ~90% of the planned investments over the next few years will be directed toward C&W capacity expansion, with the balance allocated to backward integration and FMEG over the next five years.
New categories drive growth in FMEG
With penetration in traditional FMEG categories such as fans and lighting exceeding ~80%, growth is increasingly being driven by newer categories, led by solar products, which delivered 2x YoY growth in FY26. The FMEG business turned profitable in FY26. It continued investments in talent, product development, brand building, and distribution expansion. Growth was driven by sharper execution, portfolio optimization, new product launches, and stronger brand traction. It has a network of over 2,900 dealers and distributors in FMEG.
Project Spring charts the next phase of growth
Project Spring targets C&W growth at 1.5x industry levels and FMEG growth at 2x industry levels, while enhancing profitability and strengthening market share. It targets a margin of ~11%-13% in C&W and ~8-10% in FMEG. It has planned cumulative capex of INR60b-80b over FY26-30 and continues to increase the dividend payout ratio toward ~30% by FY30 (vs. ~27% in FY26). The company aims to deepen its presence in high-growth segments such as infrastructure, renewables, data centres, railways, EV charging, and real estate, while expanding its brand and distribution reach. It also targets increasing exports to over 10% of revenue by FY30 from ~4.5% in FY26, leveraging the China+1 opportunity and strengthening its global manufacturing footprint.
Valuation and view
We estimate a CAGR of 22%/23%/22% in Revenue/EBITDA/EPS over FY26-28. Despite near-term challenges, demand remains strong, while ongoing capacity expansions position the company to capitalize on the upcycle and sustain growth. We estimate OPM to be at ~14% in FY27/FY28E (similar to 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 INR50.1b in FY28 vs. INR41.5b in FY26. We reiterate our BUY rating on POLYCAB with a revised TP of INR11,950 (based on 45x FY28E EPS).
For More Research Reports : Click Here
For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412
