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Growth momentum remains intact in C&W

We met the management of POLYCAB to discuss business trends in the Cables & Wires (C&W), FMEG, and EPC segments, raw material price trends, key strategic initiatives, and channel inventory. Here are key highlights of the discussion:

* Channel inventory, which had risen to ~40-45 days in 3QFY26 (vs. normal ~21-24 days), normalized within the first 20 days of Jan’26 amid strong demand recovery. The company has now passed on the entire cost increase (vs. ~70% in 3Q), driving margin recovery in 4QFY26.

* It has gained meaningful market share in 9MFY26, growing well ahead of industry, and it has reiterated its 1.5x industry growth target till FY30 under Project Spring. Real estate demand remains strong, while affordable housing and the government’s City Economic Region push should further support wire demand.

* Unorganized players account for ~40% of wires, and POLYCAB sees limited impact from new entrants. The company holds ~30% share in organized wires, aided by a strong network of dealers and distributors (200k+ electricians/retailers), structured loyalty programs, and 34 warehouses enabling 24-hour replenishment.

* Exports form ~6% of revenue (target 10%+ by FY30). With reduced tariff, the US and Europe offer incremental opportunities amid the China+1 sourcing shift. The company is strengthening its US distribution footprint. We remain structurally positive on POLYCAB, supported by its leadership in the C&W segment, a favorable industry outlook, a strong balance sheet, and healthy return ratios, providing visibility for steady growth and capital efficiency. We reiterate our BUY rating with a TP of INR9,600 (based on 40x FY28E EPS).

Inventory spike reverses faster; margin improvement likely

* The company continues to strengthen its leadership position in domestic C&W industry, supported by steady market share gains owing to strong execution, channel engagement, and strategic pricing actions. Its market share in the domestic organized C&W stood at 26-27% in FY25 vs. 22-24%/ 18% in FY23/FY19. In 9MFY26, the company’s volume growth outpaced industry growth, which suggests continued market share gain.

* Copper, which accounts for ~50%-60% of raw material costs for POLYCAB, saw a price surge in 3QFY26. This has materially increased cost and prompted dealers to front-load purchases, pushing inventory from 21-24 days to 40-45 days. Although the company follows a commodity-linked pricing mechanism with dealers that helps mitigate copper volatility, the spike constrained immediate price revisions, with POLYCAB passing only ~70% of the increase while absorbing the balance to protect volumes and channel relationships.

* Now since demand remains strong, higher inventory has been consumed with 20 days of Jan’26. Further, the company also passed on the entire cost increase, which is likely to drive margin recovery in FY26. It has a strong distribution system, with 34 warehouses, which help in better planning of inventories and replenishing inventory within 24 hours.

Multi-brand strategy; higher A&P to accelerate brand recall

* POLYCAB operates five differentiated wire brands – Green Wire, Suprema, Etira, Primma, and Optima, catering to distinct customer segments. Its economy offering, Etira, launched ~two years ago, has strengthened its penetration in Tier 3-5 markets and now contributes ~15% of volumes, commanding a ~2% premium over comparable competing products. The premium Green Wire, offering ~20% higher heat resistance and lower smoke emission during fire incidents, is witnessing strong adoption among Tier 1 developers. Additionally, the company has established a dedicated data center vertical supplying power cables and optical fibre solutions, which is expected to emerge as a meaningful long-term growth driver.

* Brand investments and advertising intensity are structurally rising as the company scales up its consumer-facing portfolio. Advertising and promotion (A&P) spending is guided to increase gradually toward 3-5% of B2C revenue annually, with higher intensity typically observed in festive and pre-summer periods. Even with elevated quarterly spending, current A&P intensity remains below the long-term target, indicating further headroom for brand investments.

* These initiatives are aimed at strengthening brand recall, supporting FMEG expansion, and improving premiumization across product categories. The FMEG segment itself continues to outperform industry growth and has remained profitable for multiple quarters despite increased brand investments, indicating improving operating leverage and product mix benefits.

Distribution-led growth model driving market share gain

* Distribution remains a primary growth lever, with ~90% of domestic sales routed through channel partners and only a small share from direct institutional business. The company’s pricing and incentive strategy is designed to protect demand elasticity and strengthen long-term channel loyalty. It adopted a staggered pass-through approach to commodity inflation, absorbing part of the cost increase temporarily to avoid demand disruption and enhance partner stickiness. This approach, while pressuring near-term margins, has accelerated volume growth and share gains, particularly in price-sensitive markets.

* It continues to emphasize dealer network expansion as a core pillar of its longterm strategy, driven by deeper geographic penetration, enhanced distributor productivity, and increased wallet share per channel partner. Its distribution strategy, anchored by an expanding distributor base, improved channel engagement, and tighter inventory planning, aims to strengthen last-mile reach and improve service responsiveness. This approach, reinforced under Project Spring, is enabling sharper market execution, stronger channel relationships, and superior demand capture across both retail and institutional segments.

FMEG: Targets margin expansion through premiumization

* The FMEG portfolio includes fans, lighting, switches & switchgear, conduits & accessories, and solar/appliances. Most categories are profitable, while the fan segment remains loss-making due to high competitive intensity and ongoing investments, with margins expected to improve through scale and premiumization.

* The company targets FMEG growth at ~1.5-2x industry growth, driven by distribution expansion and premiumization, and aims to achieve an EBITDA margin of ~8-10% in this segment by FY30 through operating leverage and improved product mix.

Valuation and view

* We estimate a CAGR of 16%/19%/18% in revenue/EBITDA/adj. PAT over FY26- 28. POLYCAB continues to outperform its targeted growth trajectory, supported by strong demand momentum and ongoing market share gains. With channel inventory normalizing and underlying offtake remaining healthy, management expects a strong 4QFY26. Further, raw material cost uptrend has moderated in Feb’25 (copper/aluminum prices down ~1%/3% in Feb’26 so far), with key input prices stabilizing after the sharp run-up in 3QFY26. This easing trend is expected to reduce cost pressures and support sequential margin improvement going forward.

* Its cumulative OCF is estimated at INR82.2b during FY26-28, which supports its capex requirement of ~INR14b-15b annually for future growth. We remain structurally positive on POLYCAB, supported by its leadership in the C&W segment, favorable industry outlook, a strong balance sheet, and healthy return ratios, which provide visibility for strong growth and capital efficiency. We reiterate our BUY rating with a TP of INR9,600 (based on 40x FY28E EPS).

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