Recommendation from Electrical Equipment sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.[EasyDNNnews:PaidContentStart]

Polycab India Ltd : POWERING GROWTH WIRING FUTURE

HERE IS WHY
✓  Dominant Market Position with 26–27% share
✓  Aggressive Capex Strategy
✓  Robust Liquidity with net cash surging to over ₹3,100 crore

India’s wires and cables industry has witnessed robust expansion over the past few years, growing from ₹859 billion in FY19 to ₹1,702 billion in FY24, clocking a healthy CAGR of 14.7 per cent. This momentum is expected to continue, with the sector projected to grow at a CAGR of 11–13 per cent between FY24 and FY29E. The growth is being fuelled by a confluence of structural and cyclical drivers, including surging power demand, the rapid rollout of renewable energy infrastructure, and massive investments in digital and transportation networks. As a critical enabler across power, telecom, construction, and mobility segments, the wires and cables industry is poised to remain a key beneficiary of India’s infrastructure and industrial transformation. In line with these structural tailwinds and strong industry fundamentals, we recommend Polycab India Ltd as our Choice Scrip in this edition of the magazine.

Polycab is India’s leading manufacturer of cables and wires and allied products such as uPVC conduits and lugs and glands. The company has a range of cables and wires for practically every application. More recently, Polycab has also launched a wide range of consumer electrical products like fans, switches, switchgear, LED lights and luminaries, solar inverters, and pumps.

In Q1FY26, on a consolidated basis, the revenue of the company increased by 25.71 per cent YoY to ₹5,906 crore compared to ₹4,698 crore from the previous year’s same quarter. Net profit stood at ₹600 crore compared to ₹402 crore, a YoY increase of 49.25 per cent. In FY25, the company’s PAT crossed ₹2,000 crore for the first time, reaching ₹2,046 crore, an increase of 13.48 per cent YoY.

The company is India's largest manufacturer of wires and cables. Its product portfolio includes flexible wires, building wires, optical-fibre cables, rubber cables, control cables, special purpose cables, etc. It offers 10,600+ SKUs for retail and industrial use and holds a 26-27 per cent share in the organised domestic market. The company derives 86.7 per cent of its revenue from the wire and cable segment. The domestic business grew 32 per cent YoY, with cables continuing its outperformance over wires. Both channel and institutional segments witnessed strong traction. For Q1FY26, margins expanded by ~190 bps YoY to 14.7 per cent, aided by strategic price adjustments and operating leverage. The Fast-Moving Electrical Goods (FMEG) business maintained its healthy growth momentum, recording an 18 per cent YoY growth. Solar products sustained their robust growth trajectory, clocking more than 2x YoY growth and emerging as the largest category within the FMEG portfolio.

Polycab has a defined capital expenditure plan as part of its "Project Spring" long-term roadmap. The company's guidance for capital expenditure under Project Spring is to invest roughly ₹1,200 crore to ₹1,600 crore annually through FY30. A large part of this Capex will be for the Cables and Wires business. The remaining portion of the Capex is allocated for backward integration. The company has increased advertising and promotion (A&P) spends. The company plans to increase its A&P spends, targeting 3 per cent to 5 per cent of B2C top-line, especially around the festive season, to enhance brand visibility and drive sales.

On the valuation front, the shares of the company are trading at a PE of 46.8x, compared to the industry PE of 32.5x and similar to its three-year median PE of 46.4x. The company's three-year sales growth and profit growth stand at 22.4 per cent and 29.4 per cent, respectively. Polycab India is well positioned to capitalise on the market; hence, we recommend a BUY.

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