Whalesbook
Margin Pressures and Management Outlook
Polycab India's robust revenue growth in the December quarter was tempered by a significant squeeze on operating margins. The company reported a 110-basis-point year-on-year decline, hitting a five-quarter low. Management acknowledges this pressure, particularly in the cables and wires segment where margins fell 150 basis points, and the EPC segment saw a steeper 210-basis-point contraction.
Despite these headwinds, the company expressed confidence in sustained growth momentum for the March quarter. Strategic price hikes were implemented in January, with further increases planned to support sequential margin recovery. However, management cautioned that year-on-year margins could still exhibit a decline due to the base effect and ongoing cost pressures.
Segmental Performance and Demand Resilience
The stellar 46% year-on-year revenue expansion was primarily fueled by strong volume traction across both the core wires and cables division and the Fast Moving Electrical Goods (FMEG) segment. Private capital expenditure, renewed housing demand, and effective inventory restocking by distributors were key drivers for the wires and cables business. The FMEG segment continued its positive earnings before interest and taxes (EBIT) trajectory.
Notably, Polycab reported no discernible demand impact from the sharp surge in commodity prices. This resilience suggests strong pricing power and stable consumer demand for its products, even amidst rising input costs. The company also provided medium- to long-term guidance, expecting EPC operating margins to stabilize in the high single digits.
Analyst Consensus Remains Bullish
Leading brokerages largely reiterated their positive stance on Polycab India. Citi, maintaining its 'Buy' rating, significantly boosted its price target to ₹9,500, reflecting confidence in the company's long-term prospects and market positioning. Jefferies also held its 'Buy' recommendation with a target of ₹9,225.
Jefferies highlighted that even after a substantial rally of nearly 50% since March 2025, Polycab India's stock continues to trade at a modest discount to its five-year average valuation. The firm views the company as a prime beneficiary of anticipated growth in private capital expenditure, housing development, and broader infrastructure initiatives, forecasting an earnings per share (EPS) compound annual growth rate (CAGR) of 25% through FY25-28.
Morgan Stanley echoed this optimism, reiterating an 'Overweight' rating with a target price of ₹9,373. The brokerage specifically pointed to the robust volume-led growth in the cables and wires segment. However, it flagged potential margin headwinds stemming from delayed pass-through of input cost increases, an unfavorable product mix, and increased advertising expenditure as factors to monitor.