POLYCAB - Polycab India Limited Share Price

Management of Polycab India Limited provided an optimistic outlook for the company during the Q1 FY26 Earnings Conference Call held on July 18, 2025. Highlights from their forecast include:

1. Overall Performance: The company reported its highest-ever Q1 revenue, achieving a consolidated revenue growth of 26% YoY, primarily driven by the Wires and Cables segment, which grew 31% YoY.

2. Profitability: EBITDA increased by 47% YoY with an EBITDA margin improvement of 210 basis points to 14.5%. The Profit After Tax (PAT) was approximately Rs.6 billion, reflecting a 49% YoY growth and a PAT margin increase of 170 basis points to 10.2%.

3. Growth Drivers: Management expects strong tailwinds from increased infrastructure spending, improved private sector investments, and momentum in the real estate sector, which will support continued growth in Q2 FY26 and beyond.

4. Project Spring Initiative: Under Project Spring, the company aims for a long-term roadmap emphasizing growth through strategic initiatives, targeting an ambitious 1.5 to 2 times the industry growth rate in the Fast-Moving Electrical Goods (FMEG) segment, with expected EBITDA margins of 8% to 10% by FY30.

5. Capex Guidance: Capital expenditure in Q1 FY26 was Rs.4.1 billion, in line with annual guidance of Rs.12 billion to Rs.16 billion for FY26 to FY30.

6. Exports and Market Position: The company continues to see healthy demand in international markets, especially in the U.S., where India's lower tariff rates compared to competitors position it favorably.

7. Future Demand Expectations: Management highlighted ongoing government investments, stating that the government has spent Rs.1.26 trillion monthly since December 2024, translating to firm demand for cables and infrastructure solutions.

Overall, Polycab India Limited is positioned well for sustained growth, bolstered by strategic planning and favorable market conditions.

Q&A Section Summary from Polycab Q1 FY26 Earnings Call

1. Question: Can you throw some light on the export scenario, particularly in the U.S. geography because of the tariff issue that is going on there? And what is the growth outlook across the FMEG categories?

Answer: Exports to the U.S. are impacted by tariffs, but they still represent a significant opportunity. About one-third of our exports go to the U.S., where India benefits from lower tariffs (10%) compared to other countries like China (55%). For the FMEG business, we anticipate growth at 1.5 to 2 times the industry's growth rate of 8-10%. We expect positive momentum due to real estate recovery, particularly in categories like fans and lighting.

2. Question: Can you please throw some light on the capex plans for the next two years, FY26 and FY27?

Answer: We plan to spend Rs.6,000 to Rs.8,000 crores over the next five years, translating to approximately Rs.1,200 to Rs.1,600 crores annually. In Q1 FY26, we have already spent Rs.410 crores, in line with our guidance. Most of this capex will be directed towards the Cables and Wires business, with some allocated for backward integration and FMEG.

3. Question: Are we seeing any pricing aggression from Chinese players in markets outside the U.S., such as the Middle East and Australia?

Answer: In Europe, there's minimal competition from Chinese products; customers prefer non-Chinese alternatives despite lower prices. In the Middle East, huge infrastructure investments translate to strong demand for cables, and India competes effectively. However, in Australia, China holds a pricing edge due to zero tariffs.

4. Question: Are we witnessing a slowdown in government spending or order activity?

Answer: We see no slowdown in government spending; the government has been consistently expending around Rs.1.26 trillion monthly. The demand for cables remains strong, especially from project execution that aligns with governmental investments and affordable housing growth in Tier 3-5 cities.

5. Question: What exactly are the strategic initiatives contributing to margin increase?

Answer: Strategic pricing adjustments, operating efficiencies, and a favorable product mix have allowed us to enhance margins. Stable copper prices this quarter facilitated pricing optimization without impacting profitability. A shift in the revenue mix towards higher-margin Cables over EPC business also supported this margin growth.

6. Question: Can you provide some updates on the EPC business contribution and order book?

Answer: The EPC business currently holds an order book of Rs.80 billion, including projects like BharatNet. We anticipate 12-14% EBITDA margins from these orders, with execution commencing in the second half of the year. EPC's contribution is expected to remain around 5-10% of total revenues moving forward.

7. Question: Can you elaborate on the solar product contributions and upcoming plans in that segment?

Answer: Solar products, primarily solar inverters, have become the largest contributor within the FMEG segment. The current focus remains on solar inverters, and we are not looking to enter additional solar product categories at this time. We see ongoing demand driven by governmental incentives, especially from states like Maharashtra and Gujarat.

8. Question: What is the market share of Polycab in the cable and wire segment?

Answer: Our market share in the organized Cables and Wires sector hovers around 26-27%, with cables contributing approximately 30% and wires around the early 20s. Continued growth from both organized and unorganized players contributes to our market share gains.

These answers provide comprehensive insights while maintaining a concise format, ensuring clarity on Polycab's strategic outlook, market positioning, and growth projections.