POLYCAB - Polycab India Limited Share Price

The management of Polycab India Limited provided a positive outlook for FY26, emphasizing strong growth potential across all business segments. They reported a record revenue of over Rs.220 billion for FY25, marking a 24% YoY increase and reaffirming the company's position as the largest electrical company in India. For FY25, the company's profit after tax (PAT) surpassed Rs.20 billion, showcasing 13% growth compared to the previous year.

Key forward-looking points highlighted by management include:

1. Segment Growth: The Wires and Cable segment grew by 22% YoY in Q4, aided by a domestic market growth of 27%. The FMEG (Fast-Moving Electrical Goods) business saw a 33% increase, achieving profitability for the first time in ten quarters.

2. Future Revenue Targets: Management anticipates continued expansion in both domestic and international markets. The export contribution is expected to rise from 6% to 10% by FY30 as new international geographies are tapped.

3. Margin Guidance: EBITDA margins are projected to stabilize between 11% and 13% for the cables and wires business. Improvements in operational efficiency and product mix are expected to contribute positively to margins.

4. Capital Investments: A significant capital expenditure of Rs.60 to Rs.80 billion is planned over the next five years under "Project Spring," aimed at enhancing capabilities and innovation within the company.

5. EPC Segment Growth: The EPC business has an open order book of approximately Rs.70 billion, driven by RDSS projects, with expectations for sustained execution and revenue generation over the coming years.

Overall, Polycab's management expressed confidence in the resilience of the Indian economy and the company's positioning for sustained growth amid global challenges.

Question & Answer Summary from Polycab's Q4 FY25 Earnings Conference Call

1. Question: "Could you quantify how much of the domestic cable and wire segment growth is volume versus value, and split between cables and wires?"

   Answer: For the quarter, the volume growth in domestic cables and wires was around mid-teens, with the remainder coming from value increase. Notably, cables showed higher volume growth in the higher teens, while wires achieved high single-digit growth.

2. Question: "Can you provide the volume growth trend for FY25 and FY24 for the domestic market, including cables and wires?"

   Answer: For FY25, the volume growth in cables and wires was around mid-teens, with cables slightly outperforming wires which saw high single-digit growth. For FY24 specifics, please refer to last year's call, as I don't have it readily available.

3. Question: "Could you elaborate on why fourth-quarter margins improved despite a dip in exports?"

   Answer: There were no one-off factors affecting margin improvement. The increase is due to operational leverage and consistent margin improvement quarter-on-quarter. Fourth quarters typically yield better margins, and this year aligns with that trend.

4. Question: "What is your EBIT margin guidance for cables and wires over the next few years?"

   Answer: Under Project Spring, we anticipate EBITDA margins for cables and wires to range consistently from 11% to 13%. For FY25, EBIT margins stood at 13.6%, while EBITDA margins would likely be around 14% to 15%.

5. Question: "What are the key drivers for the 100-basis points margin expansion observed?"

   Answer: The sequential margin improvement is attributed to operational leverage and a favorable change in product mix. Wires outperformed cables in Q4 sequentially, positively influencing overall margins due to their higher margin profile.

6. Question: "Can you share insights on changes in pricing in response to copper price movements?"

   Answer: We regularly pass on commodity price fluctuations to customers, with recent months seeing a mid-to-high single-digit adjustment reflecting rises in copper and aluminum prices.

7. Question: "What percentage of your exports are specialized cables versus regular power cables?"

   Answer: A significant portion comprises low and medium voltage cables, which are in high demand. We also supply specialized cables depending on projects, but low/medium voltage cables make up the majority of our exports.

8. Question: "What drives the strong demand in the domestic market?"

   Answer: Demand momentum is primarily driven by low and medium voltage cables, which account for nearly 50% of the market. Renewable energy transition and recovery in real estate also contribute significantly to the rising demand.

9. Question: "What's the guidance on R&D expenditures in absolute terms and future investments?"

   Answer: While I can't provide specific percentages, we plan to consistently increase R&D spending as part of our commitment to innovation under Project Spring. This will not be a one-time increase but a sustained focus on advancing our capabilities.

10. Question: "What's the current status and contribution of the RDSS projects in your pipeline?"

Answer: The Rs.70 billion order book consists of Rs.40 billion from RDSS projects and Rs.30 billion from BharatNet. We expect this to provide a consistent revenue stream over the next few years.