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Robust revenue performance: Polycab India posted strong overall performance as its revenue came in at Rs 4,218 Cr experiencing a growth of 26.6% YoY while sequentially despite the high base it grew by 8.4%. Growth was primarily led by its core segment; Wires & Cables which reported revenue of Rs 3,805 Cr, up by 28.9% YoY/7.7% QoQ. Its domestic business accounted for ~90.7% of the overall revenue to Rs 3,826 Cr whereas international business revenue share was at ~9.3% to Rs 392 Cr.

Better operating leverage driving margins growth: Increased consumption across sectors supported volumes growth of 30+% YoY/ 20+% QoQ in Cables/Wires, favorable product mix coupled with stable raw material price of copper, aluminum and others resulted in better operating leverage. As a result, gross profit was up by a healthy 32.3% YoY/11.7% QoQ to Rs 1,184 Cr with a margin of 28.1%. Consequently, EBITDA posted a growth of 42.4% YoY/11% QoQ to Rs 609 Cr and a margin of 14.4%.

Revamped FMEG strategy yet to gain traction: Despite the fans and lighting category posting a de-growth due to weak consumer sentiments, FMEG revenue was up by 8.1% YoY/4.9% QoQ to Rs 330 Cr. The segment revenue growth has not transcribed into its profitability as it posted a EBIT loss of Rs 6 Cr, indicating that the revamped strategy to drive profitability higher is yet to gain traction. As per the company, the FMEG segment market is estimated at ~Rs 45,300 Cr which provides a high growth opportunity over the coming years. We anticipate the company to gradually increase its presence over the coming which shall aid in improving the profitability of the segment.

To benefit from overall infrastructure growth: The overall cables & wires industry has benefitted well over the last few years due to government focus on improving the infrastructure with respect to metros, roadways as well as demand from power as well as recent uptick in residential real estate activities. Similarly, given the company’s leadership position and distribution reach it has been one of the largest beneficiaries of such demand trends. Going ahead, we anticipate the traction in solar sector, robust residential activities and switch towards branded products shall aid to the overall growth for the company

Outlook & Valuations: Polycab continues to be the industry leader with a market share of 22-24% in the organized market largely benefiting from strong demand from government capex and real estate up-tick. It foresees a large opportunity in the FMEG business and the realignment of its strategy for the segment shall aid in margin and profit expansion in the future. It has also ventured into the Extra High Voltage (EHV) segment which will be operational by the beginning of FY26 and also looks to continuously expand its international business as it aims to be top 5 players globally. We believe all these factors shall enable the company to post strong overall operational performance. Financially, we estimate its revenue/EBITDA/PAT to grow at a CAGR of 22.9%/30.7%/30.3% over FY23-FY25E and recommend Hold rating with a revised target price of Rs 5,562 valuing the company at 38x on its FY25 EPS.

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