Company Update : Polycab India by Motilal Oswal Financial Services Ltd
Result above estimates; FMEG remains profitable
* POLYCAB’s 1QFY26 revenue grew ~26% YoY to INR59.1b (+5% vs. estimates). Strong revenue growth was supported by ~31%/18% YoY growth in Cable & Wire (C&W)/FMEG segments, respectively. EBITDA rose ~47% YoY to INR8.6b (+16% vs. estimates), and OPM surged 2.1pp YoY to 14.5% (+1.4pp vs. estimates). PAT grew ~50% YoY to INR5.9b (+17% vs. our estimate) in 1QFY26.
* In C&W, domestic business grew ~32% YoY, with cables outperforming wires in terms of growth. The international business grew ~24% YoY, albeit on a low base. Exports accounted for 5.2% of overall revenue vs. 5.3%/4.7% in 1QFY25/4QFY25. EBIT margin improvement was led by strategic price revisions, better operational efficiency, and a favorable product mix.
* The FMEG segment posted an EBIT of INR98m against a loss of INR28m in 1QFY25. Margin improvement was led by gross margin expansion, premium product mix improvement, and improved operating leverage.
C&W revenue up ~31% YoY; EBIT margin up 1.9pp YoY to 14.7%
* POLYCAB’s C&W revenue grew ~31% YoY to INR52.3b (+11% beat), EBIT rose ~50% YoY to INR7.7b (~26% beat), and EBIT margin was up 1.9pp YoY to 14.7% (est. 13.0%).
* FMEG revenue increased ~18% YoY to INR4.5b. It reported a segment profit of INR95m vs. a loss of INR28m in 1QFY25. However, in EPC, the company’s revenue declined ~19% YoY to INR3.5b, and EBIT declined 31% YoY to INR268m. EBIT margin dipped 140bp YoY to 7.7%.
* Overall gross margin stood at 26.9% vs. 24.6%/25.5% in 1QFY25/4QFY25. Ad spending was 0.3% of revenue vs. 0.5%/0.4% in 1QFY25/4QFY25
Highlights from the management commentary
* Strong revenue growth in the C&W segment was backed by sustained demand across core sectors. Key growth drivers included higher govt. expenditure, better project execution, and rising commodity prices.
* In FMEG, the fans segment witnessed a muted performance, impacted by a shorter summer season. However, categories like lights, switchgears, switches, and conduit pipes & fittings delivered healthy growth, supported by steady demand from the real estate sector. Solar products sustained a robust growth trajectory, clocking more than 2x YoY growth, and emerging as the largest category within the FMEG portfolio.
* In EPC, it anticipates the annual sustainable operating margin to be in the high single digits over the mid-to-long term.
Valuation and view
* POLYCAB reported earnings above our estimates, led by a strong beat in the C&W business and a higher-than-estimated FMEG margin. The company remains a market leader in the C&W industry, benefiting from continuous capacity expansion and a strong margin trajectory.
* We have a BUY rating on the stock. However, we will review our estimates after the conference call on 18th Jul’25 (Concall Link).
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