Company Update : Polycab India Ltd By Motilal Oswal Financial Services Ltd
EBITDA above estimate, FMEG achieves breakeven in 4Q
* POLYCAB’s 4QFY25 revenue grew 25% YoY to INR69.9b (in line). EBITDA rose ~35% YoY to INR10.3b (+7% vs. est.) and OPM surged 1.1pp YoY to 14.7% (+50bp vs. est.). PAT grew ~33% YoY to INR7.3b (+13% vs. our est., led by lower interest costs and higher other income than our estimate).
* The company’s market share in the cables & wires (C&W) segment improved to 26-27% in FY25 from 25-26% in FY24. In C&W, the domestic business grew by 27% YoY, with cables growth being higher than wires. The international business declined 24% YoY due to the rollover of a large order into the next quarter. For FY25, exports contributed 6.0% to consolidated revenue. A strong rebound is expected in FY26 in exports, supported by a robust order book and a favorable demand environment across key markets.
C&W revenue up 24% YoY and EBIT margin flat YoY at ~15%
* C&W revenue grew ~24% YoY to INR60.2b (in line), EBIT rose ~23% YoY to INR9.1b (~11% beat), and EBIT margin was flat YoY at 15.1% (est. 14.0%).
* ECD revenue increased ~33% YoY. It reported a segment profit of INR19m (vs. estimated loss of INR86m) vs. a loss of INR459m in 4QFY24.
* EPC business revenue increased ~33% YoY (15% beat) to INR4.9b. EBIT rose 52% YoY (down ~10% QoQ) to INR404m. EBIT margin expanded 1.0pp YoY to 8.2%.
* Overall gross margin stood at 25.5% vs. 25.3%/25.7% in 4QFY24/3QFY25. Ad spending was 0.4% of revenue vs. 0.7% in 4QFY24/3QFY25 (each). Depreciation and interest expenses increased 22%/33% YoY, while other income declined 11% YoY.
* In FY25, revenue/EBITDA/PAT grew 24%/19%/13% YoY. EBITDA margin dipped 60bp YoY to 13.2%. C&W revenue/EBIT grew 18%/ 7% YoY, while EBIT margin contracted 1.4pp YoY to 13.5%. FMEG revenue grew 30% YoY, while the segment’s losses stood at INR389m vs. INR942m in FY24. OCF stood at INR18.1b vs. INR13b in FY24. Capex stood at INR9.7b vs. INR8.6b in FY24. FCF stood at INR8.4b vs. INR4.4b in FY24.
Highlights from the management commentary
* C&W margins improved ~140bp QoQ to 15.1%, driven by operating leverage and a favourable product-mix, although this partially offset by the lower contribution from the international business.
* Distribution split in domestic market -- East: 20%, North: 32%, South: 27% and West: 21%. International business has spread to 84 countries from 79 in FY24.
* In the FMEG segment, all product categories recorded growth. Solar products’ revenues grew 2.5x YoY and became the third-largest category within the FMEG portfolio. The segment achieved break-even in 4Q – its first profitable quarter after 10 successive quarters of strategic investments in talent, product innovation and brand building.
Valuation and view
* POLYCAB’s 4Q operating performance was above our estimates, with higher revenue growth and margins in C&W segment and break-even in FMEG vs. an estimated segment loss.
* We have a BUY rating on the stock. However, we will review our estimates after the concall on 07th May’25 (Concall Link).
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