POLYCAB - Polycab India Limited Share Price

Management provided an optimistic outlook for Polycab India Limited, highlighting a strong performance in Q2 FY 2026. The company achieved its highest ever second quarter revenue and profitability, with a PAT reaching approximately Rs.700 crores, marking a 56% YoY growth. The management emphasized robust demand in the Wires & Cables segment, which saw a 21% YoY revenue growth and continued strength in government spending on infrastructure projects.

Key forward-looking points include:

1. Project Spring: The company continues to make significant progress, with capital expenditure (capex) for H1 FY 2026 totaling approximately Rs.7.5 billion, consistent with the annual investment guidance of Rs.12 billion to Rs.16 billion.

2. Strong market positioning: Polycab aims to achieve revenue growth at 1.5x to 2x the industry rate while maintaining a focus on margin improvement, targeting an EBITDA margin of 8%-10% by FY 2030.

3. Inventory strategy: As part of anticipatory measures for strong demand, Polycab increased inventory levels, which has temporarily adjusted working capital cycles to 33 days but is expected to normalize to a long-term steady range of 50-55 days.

4. Economic indicators: Despite global economic slowdowns, India is projected to maintain its status as the fastest-growing major economy, with domestic consumption providing a buffer against external challenges.

5. Continued investment in R&D: The company is focused on enhancing its special purpose cables segment for defense, automobiles, and railways, anticipating growth in this vertical.

6. Dividend policy: The management raised the dividend payout to 26.3%, with a target of surpassing a 30% payout by FY 2030.

Overall, the management's outlook reveals confidence in sustained growth, strong fundamentals, and a proactive approach to addressing market opportunities and challenges.

Major Q&A from Polycab's Q2 FY 2026 Earnings Conference Call

1. Question: "In this 21% YoY sales growth in cables and wires, approximately how much would be volume? And if you could further categorize them between cables and wires?"
   Answer: The 21% revenue growth reflected high teens in volume growth, with both cables and wires contributing equally to revenue. Cables showed slightly higher volume growth, partly due to a high base from the previous year's copper price pre-stock.

2. Question: "On the EPC segment, how should we look at the revenue and margin profile going forward?"
   Answer: In H2 FY 2026, we expect improved revenue from RDSS contracts and the BharatNet project, which will contribute positively to both top-line and bottom-line, enhancing the EPC segment's overall performance.

3. Question: "What was the one-off component in the EPC margins in Q2?"
   Answer: The one-off was approximately Rs.30 crores. Excluding this, EBIT margins would be around 10%, consistent with our guidance, due to changes in contract terms.

4. Question: "Is there an update on the EHV segment because that seems to be a good demand driver?"
   Answer: The EHV plant remains on schedule, expected to be commissioned by the end of next calendar year, with benefits anticipated from FY 2028.

5. Question: "With the recent copper price rally, what is your sentiment on volume growth and the impact on margins?"
   Answer: Increased volume growth is tied to strong fundamental demand rather than stockpiling. Margins benefited from operating leverage and product mix, especially with premium wire sales rising.

6. Question: "Can you elaborate on the margin profile of solar products within FMEG?"
   Answer: While we don't provide specific product margins, the solar segment is profitable. We aim to enhance margins by increasing the contribution of higher-margin products like switchgears and switches.

7. Question: "How do you see the entry of new players affecting competition and margins?"
   Answer: New entrants will increase competition over time. However, we will adapt our strategies and maintain our market share. Our focus on quality and product differentiation will help us navigate the evolving landscape.

8. Question: "What is your current capacity utilization in the wire and cable segment?"
   Answer: Our capacity utilization for the wire and cable segment is in the mid-70s percentage-wise, indicating strong operational performance.

9. Question: "What incremental revenue potential are you targeting from your current capex?"
   Answer: We expect a 4x to 5x return on our capex over a lag of 1.5 to 2 years as we scale our capacities across various cable types, supporting future growth.

10. Question: "What are the current order books for RDSS and BharatNet?"

Answer: The order book for RDSS is currently at Rs.33.5 billion. BharatNet's order book remains similar to last quarter's, at about Rs.80 billion, pending execution starting next quarter.