NEW DELHI: In Q2, Polycab India (POLYCAB IN) reported a stellar 30% increase in topline revenue, which was 5% higher than anticipated. Despite pressure on EBITDA margins from higher advertising costs and more competition in the wires industry, this rise was propelled by significant volume increases across all categories and strong domestic demand.
The management expects margins to normalize in the second part of the fiscal year, notwithstanding these difficulties. Although accomplishing this turnaround may be challenging, the company’s Future-Minded Electrical Goods (FMEG) division is anticipated to turn around by FY26, mainly through the launch of premium items and greater operating leverage.
Project LEAP, Polycab’s ambitious initiative, is on track to reach its topline goal of INR 200 billion by FY26. Surprisingly, the company’s first half of FY25 revenues topped INR 100 billion, and it now anticipates hitting its goal a year ahead of schedule.
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The Cables and Wires (C&W) division of Polycab has led the way with a 28% year-over-year gain, surpassing rivals like Havells and KEI Industries. division performance has demonstrated exceptional growth. While the cables section expanded by 12–13%, the wires segment saw a strong volume growth of 20–25%.
Strong demand for fans, lighting, and switches drove a 21% gain in the FMEG market, which also did well. Additionally, orders from the Revamped Distribution Sector Scheme (RDSS) and involvement in the BharatNet scheme, which saw contracts worth INR 500 billion for optic fiber connectivity, drove an incredible 190% rise in the EPC industry.
Nevertheless, the business encountered a few short-term challenges that impacted its profit margins. Profitability was harmed by a competition increase in September, changes in copper prices, and higher advertising costs prior to the holiday season. While FMEG losses increased dramatically, the EBIT margin for cables fell 230 basis points year over year to 14.6%. However, Polycab anticipates a recovery in margins in the second part of the fiscal year.
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Since the outlook is still favorable, analysts have maintained their “Buy” recommendation for Polycab, raising the target price from INR 8,290 to INR 8,650. This evaluation is predicated on a 20% compound annual growth rate (CAGR) in earnings from FY24 to FY27, as well as robust ROE and ROCE of 23% and 24%, respectively.
As Polycab continues to leverage its industry-leading margins and expansive growth strategy, it remains a preferred long-term investment in the Indian consumer electrical market.