Polycab Posts Strong Q3 Revenue, Faces Margin Squeeze

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AuthorIshaan Verma|Published at:
Polycab Posts Strong Q3 Revenue, Faces Margin Squeeze
Overview

Polycab Ltd reported a 46% year-on-year revenue increase in Q3 FY26, fueled by robust 40% volume growth in its wires and cables segment. While the FMEG business turned profitable, EBITDA margins compressed by 110 basis points due to surging copper prices and increased advertising spend. Despite strong operational execution and aggressive expansion plans, the stock's valuation at 33 times FY28 earnings signals limited near-term re-rating potential amid rising competition.

Segment Performance and Margin Pressures

Polycab Ltd. reported a robust 46 percent year-on-year revenue increase for the fiscal third quarter. This surge was primarily driven by its dominant wires and cables (W&C) segment, which saw volumes climb an impressive 40 percent. The wire segment, in particular, posted a 70 percent revenue jump, partly fueled by distributor restocking ahead of anticipated copper price hikes. Copper prices themselves escalated significantly, rising approximately 50 percent year-on-year during the quarter. This sharp commodity inflation, combined with increased advertising expenditures and a one-off gratuity provision, ultimately led to an EBITDA margin contraction of 110 basis points. The company managed to pass through only an estimated 75-80 percent of the commodity inflation during this period.

FMEG and EPC Growth Drivers

The fast-moving electrical goods (FMEG) business continued its positive trajectory, achieving EBIT-positive results for the third consecutive quarter. Revenue in this segment grew 17 percent year-on-year, propelled by strong traction in the solar category and festive demand in lighting products. Polycab management continues to target an 8-10 percent EBITDA margin for FMEG by FY30, driven by scaling up fans and premiumizing offerings. Meanwhile, the Engineering, Procurement, and Construction (EPC) segment recorded a modest 4 percent revenue increase, buoyed by a substantial order book from government schemes like RDSS and BharatNet, which promises stronger future revenue ramp-ups.

Expansion Ambitions and Valuation Concerns

Looking ahead, Polycab is initiating an aggressive expansion strategy, earmarking annual investments of Rs 1,000-1,100 crore for the next 2-3 years. These investments will primarily target Extra High Voltage (EHV) and special-purpose cables. The company's ambitious Project SPRING aims to elevate its W&C business growth to 1.5 times the industry rate. Despite strong operational performance and a generally robust demand outlook supported by private capital expenditure revival, the stock currently trades at a demanding 33 times FY28 earnings. Intense competition from new entrants like UltraTech and Adani, alongside ongoing capacity expansions by existing players, raises concerns about industry overcapacity, potentially limiting near-term upside.

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