Key Takeaways
- Domestic W&C volume jumped ~40% YoY, driven by a 70% rise in wires.
- EBITA margin compression is temporary; Project Spring aims for 8‑10% EBITDA by FY30.
- International sales added modest 5% growth, contributing 6% of total revenue.
- Capacity utilization sits at early 80% – ample headroom for scaling.
- Projected FY26‑28 CAGR: Revenue 17.1%, EBITDA 15.4%, PAT 14.1%.
- Target price Rs9,744 implies a 40x FY28E PE – a premium that demands justification.
You missed Polycab's 40% W&C explosion, and your portfolio felt it.
Why Polycab's W&C Volume Boom Beats Industry Trends
The Wires & Cables segment posted a staggering 40% domestic volume lift, with wires up ~70% and cables up ~50% YoY. This outpaces the broader Indian wiring market, which has been constrained by supply‑chain bottlenecks and a gradual post‑pandemic recovery. Two catalysts are clear:
- Low Base Effect: After a muted 2023, the rebound appears amplified.
- Channel Restocking: Distributors replenished inventories amid soaring copper prices, locking in higher‑margin orders.
For investors, the key insight is that Polycab is not merely riding a temporary wave; it is capturing market share from peers like Finolex and Havells, positioning itself as the go‑to supplier for infrastructure projects and residential electrification.
How International Sales and Capacity Utilization Shape Future Margins
Polycab’s overseas business added a modest 5% YoY growth, now accounting for 6% of total turnover. While small, this foothold in Africa and the Middle East diversifies revenue streams and cushions domestic cyclicality. More importantly, the company’s capacity utilization sits at early 80% in Q3FY26, suggesting that current demand can be met without immediate capex, preserving cash flow.
When utilization climbs toward 90‑95%, incremental revenue translates into higher operating leverage, boosting margins without proportionate cost hikes. This operational leeway is a critical driver for the projected EBITDA expansion.
Project Spring: The Roadmap to 8‑10% EBITDA by FY30
Project Spring is Polycab’s strategic blueprint to lift the FMEG (Fast‑Moving Electrical Goods) segment EBITDA margin to 8‑10% by FY30. The plan hinges on three pillars:
- Product Mix Shift: Solar‑related offerings already grew 2x, and the company aims to double the segment’s contribution to overall sales.
- Cost Discipline: Reducing A&P (Advertising & Promotion) spend once the brand campaigns stabilize.
- Labor Efficiency: Implementing the new labor code while phasing out one‑off gratuity provisions that inflated the current quarter’s expense.
Assuming successful execution, the FMEG segment could deliver 1.5‑2x industry growth, pulling the consolidated EBITDA margin into the high‑single digits.
Technical Deep‑Dive: EBITA Margin, A&P Spend, and Labor Code Impact
EBITA (Earnings Before Interest, Taxes, and Amortisation) margin dipped temporarily because of two non‑recurring items:
- Elevated A&P Expense: Heavy brand‑building in a competitive market; expected to normalize as campaigns wind down.
- Gratuity Provisioning: A one‑off charge tied to the new labor code, which will recur only if further statutory changes arise.
Analysts often adjust EBITA for such items to gauge underlying operating performance. Ex‑adjusted EBITA shows a healthy trend, aligning with the 40% volume surge and indicating that margin compression is not structural.
Investor Playbook: Bull vs. Bear Cases for Polycab India
Bull Case
- Sustained domestic demand driven by government electrification and renewable‑energy projects.
- Market‑share gains in wires, a high‑margin sub‑segment.
- Successful rollout of Project Spring, delivering 8‑10% EBITDA by FY30.
- Capacity utilization headroom fuels operating leverage.
Bear Case
- Margin pressure could linger if A&P spend remains elevated or raw‑material (copper) costs surge further.
- International expansion may falter due to geopolitical risk or currency volatility.
- Valuation premium (40x FY28E PE) leaves little room for error; any earnings miss triggers sharp price corrections.
- Regulatory changes in labor law could introduce additional one‑off costs.
In summary, Polycab India sits at a pivotal inflection point. The 40% W&C volume lift and early‑stage capacity utilization provide a solid runway, but investors must monitor margin‑recovery metrics and the execution of Project Spring. Those comfortable with a premium valuation and willing to ride the growth narrative may find a compelling long‑term thesis, while risk‑averse participants might wait for margin normalization before committing significant capital.