Polycab India Limited, a leading manufacturer of wires and cables, has reported its strongest second quarter and half-year financial results to date, with record revenue, EBITDA, and profitability. Despite this robust performance, shares traded on a flat note as several brokerages offered their revised outlooks and price targets for the stock.
Strong Q2 Performance Fuels Optimism
For the second quarter, Polycab India saw its net profit surge by 43% year-over-year to Rs 990 crore, a significant increase from Rs 692.95 crore in the same period last year. Revenue also climbed impressively by 53% to Rs 9898.9 crore, up from Rs 6477.2 crore previously. Operating EBITDA for the quarter rose 39% year-over-year, reaching Rs 1422.5 crore, while PAT margins improved by 260 basis points year-over-year and 50 basis points quarter-over-quarter to 10.7%.
Brokerages Weigh In on Polycab's Outlook
Following the Q2 earnings, brokerage firms provided their assessments of Polycab's future. Motilal Oswal reiterated a 'BUY' rating, setting a target price of Rs 10,600. The firm projects a Compound Annual Growth Rate (CAGR) of 24% for revenue, 24% for EBITDA, and 23% for EPS over FY26-28, estimating an Operating Profit Margin (OPM) of 14% in FY27/FY28E. Motilal Oswal also anticipates a cumulative capital expenditure of Rs 2600 crore over FY27-28E, with the company's net cash balance expected to increase significantly.
Meanwhile, JM Financial maintained an 'ADD' call on the stock, adjusting its target price to Rs 9,200 from an earlier Rs 9,550. While factoring in Polycab’s strong Q2 performance with upgrades to its FY27/28/29E earnings per share estimates, JM Financial cautioned that a very high base moving into the second half of the fiscal year and the cessation of benefits from higher input prices could lead to Polycab underperforming some peers.
Polycab Addresses UltraTech's Market Entry
A key point of discussion was the potential impact of UltraTech Cement's recent entry into the cables and wires (C&W) segment. Polycab's management, however, indicated that this would have a negligible impact on its business. They explained that UltraTech's initial focus is on wires, which constitutes a relatively smaller portion of Polycab's overall operations. Wires account for approximately 30% of the estimated Rs 1.1 lakh crore industry, with the unorganized sector contributing 30–35% of the total market. This significant headroom suggests that a new entrant can gain market share without directly affecting Polycab's established business.
Management also noted that any competitive threat would likely be greater for players with a higher exposure to wires. Polycab does not intend to engage in pricing wars and plans to maintain its existing price premium over competitors, asserting that the actual impact will depend on UltraTech's execution of its expansion plans.