Motilal Oswal Recommends Buy on Polycab India With ₹9600 Target
Overview
Motilal Oswal has initiated a 'Buy' recommendation on Polycab India, setting a target price of ₹9,600. The brokerage noted strong 46% YoY revenue growth in 3QFY26, primarily driven by the cable and wire segment. However, rising raw material costs significantly impacted segment margins, leading to a slight dip in operating profit margin compared to estimates. Despite this, adjusted EBITDA and PAT remained in line with expectations, and the company is projected to maintain healthy liquidity.
Stocks Mentioned
Motilal Oswal Securities initiated coverage on Polycab India with a 'Buy' rating and a price target of ₹9,600.
Strong Revenue Surge, Margin Pressure
The research report highlighted a robust 46% year-over-year revenue growth for Polycab India in the third quarter of fiscal year 2026. This expansion was predominantly fueled by a significant 54% surge in the cable and wire (C&W) segment. However, the report cautioned that steep raw material cost inflation exerted considerable pressure on the C&W segment's profitability.
Financial Performance Breakdown
Adjusted operating profit margin (OPM) stood at 12.9%, showing an 85 basis point decline year-over-year. This figure was also 1.6 percentage points below analyst estimates, partly due to a 25 basis point impact from employee cost provisioning. Adjusted EBITDA reached ₹9.9 billion, marking a 37% increase year-over-year and aligning with forecasts. Advertising and promotion (AD) spends as a percentage of revenue saw an increase of 50 basis points year-over-year and 70 basis points quarter-over-quarter. Adjusted profit after tax (PAT) was reported at ₹6.5 billion, up 42% year-over-year and in line with expectations.
Positive Outlook and Liquidity
Looking ahead, the outlook suggests further improvement in the company's liquidity position. Motilal Oswal estimates Polycab India's net cash to reach ₹29.8 billion by FY28E, compared to ₹30.3 billion as of December 2025. This healthy cash position underpins the brokerage's confidence in the company's financial stability and growth prospects.
Valuation and Recommendation
Motilal Oswal reiterates its 'Buy' rating, basing the ₹9,600 price target on a multiple of 40 times the estimated earnings per share (EPS) for FY28E. This target price reflects the brokerage's conviction in Polycab India's long-term growth trajectory, despite the short-term margin pressures.
