Polycab India’s Q1 growth is solid. Now volumes need a recharge

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Polycab India Ltd’s shares plummeted around 4% in Friday’s early session despite consolidated revenues increasing 39% year-on-year for the June quarter (Q1FY27) to ₹8,210 crore. Growth was largely driven by higher copper and aluminium prices rather than by underlying demand.

Polycab’s management said on the Q1 earnings call that wires and cables volume growth was in the low-to-mid single digits. This could be one factor troubling investors, as they typically get excited about volume growth more than price-led growth. Furthermore, Polycab’s consolidated Ebitda margin slipped to 13.8% in Q1FY27 from 14.5% a year ago.

Wires and cables revenues increased 39% year-on-year, driven by resilient demand, improved execution under Project Spring, and higher commodity prices. Domestic revenues grew 43%, while export revenues fell 13% due to geopolitical disruptions in West Asia.

Wires and cables contributed about 88% of total Q1FY27 revenues. Polycab said growth in wires outpaced cables, aided by strong on-ground execution. Channel sales outperformed institutional. The management’s strategy is focused on channel-led growth rather than institutional growth. Channel sales typically generate superior margins and help leverage distribution network across multiple product categories.

“Industry tailwinds in the form of investments power T&D (additions of 20,000–21,000ckm annually over next five years), infrastructure and data centres ( ₹25,000 crore opportunity, spread over seven–eight years) inspire confidence in meeting wires & cables growth guidance of 1.5x industry growth,” said JM Financial Institutional Securities. Ckm is circuit kilometres, used to measure length of an electrical transmission or distribution (T&D) line.

Polycab’s much smaller FMEG business, contributing 9% of Q1 revenues, continued its good run, clocking as much as 68% year-on-year growth, with solar products growing over two-fold.

Government support for rooftop solar installations under the PM Surya Ghar scheme has created a favourable environment. Polycab sees FMEG (fast-moving electrical goods) on track to meet its target of 8-10% Ebitda margins by FY30. The segment’s growth is expected at 1.5-2x industry growth.

Better operating leverage and a growing premium product mix should aid the segment’s profitability. Premium products now account for roughly a quarter of the FMEG portfolio.

The remaining revenues came from engineering, procurement, and construction (EPC), which declined by 11% owing to adverse project execution cycle and seasonality.

Polycab’s EPC order book stands at about ₹10,900 crore, comprising of ₹8,000 crore from BharatNet and ₹2,900 crore RDSS (revamped distribution sector scheme) projects. The company expects meaningful execution over FY27 onwards, with nearly ₹4,500 crore of BharatNet-related revenue likely to be recognized over the next three years.

To be sure, Polycab’s Q1FY27 highlights how sensitive the business remains to commodity prices. Sharp declines in copper and aluminium prices in June led dealers to postpone purchases in anticipation of further drop in prices.

While the overseas business is a smaller part of Polycab’s story, global uncertainty is a factor worth monitoring. Exports revenue contribution in total is down to 3.3% in Q1FY27, from 5.2% last year. Polycab expects exports share in total revenue to rise to more than 10% by FY30. Overall, Nuvama Research expects the company to reach revenue of ₹37,099 crore for FY27 against ₹28,884 crore in FY26.

Factoring in the brighter side, the stock has surged 20% so far this year, and currently trades at 42 times its FY27 estimated earnings, as per Bloomberg.

Relatively lower margin of the FMEG business compared to Polycab’s consolidated margin, can pose a risk in future, as the segment’s share keeps rising. For now, valuations seem to be factoring the optimism adequately.

Shubham Dila...