Polycab shone in FY25, but will investors stay plugged in?
The W&C segment contributed 84% of Polycab's FY25 gross revenues. The company's share of the domestic organised W&C market rose from 25-26% in FY24 to 26-27% in FY25 and domestic volume growth was in the mid-teens last year.
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Cables outpaced wires year-on-year in Q4, while wires – a relatively higher-margin category – did better quarter-on-quarter, supporting the sequential margin expansion. Overall Ebitda margin stood at 14.7% in Q4, up from 13.8% in Q3 and 13.6% in Q4FY24. Specifically, the W&C Ebitda margin for FY25 was 14-15%. Pass-through of changes in copper and aluminium prices happens monthly; Polycab took a mid-to-high single-digit price hike in Q4FY25.
Wired for growth
The good run may well continue. 'Polycab has consistently outperformed in the past, with better-than-guided Ebitda margins in the cables & wires segment, so that will continue," said Achal Lohade, analyst, Nuvama Research. He noted that Polycab's domestic market share was almost double that of its closest competitor, KEI Industries Ltd. Its size (wide product portfolio) brings in huge competitive advantages, so Polycab should continue to outpace industry growth, he added.
In Q4FY25, Polycab's fast moving electrical goods business turned profitable for the first time in 10 quarters. After a strong end to FY25, management is upbeat. It said in the earnings call that domestic demand for wires and cables remained strong, led by the real estate and power sectors, and the government's capital expenditure (capex).
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Against this backdrop, Polycab is eyeing medium-term domestic W&C revenue growth of 1.5-2 times industry growth. Sustainable W&C Ebitda margin is projected to be at 11-13% over the next five years through its strategic project Spring. Capex guidance has been maintained at ₹6,000-8,000 crore for the next five years, mainly to boost the W&C business.
Meanwhile, the high-margin international business saw some hiccups. Q4FY25 export revenue fell 24% year-on-year due to a large order rollover to the next quarter. Despite tariff-led uncertainty in global trade, Polycab is expanding to new geographies to boost revenue visibility and minimise revenue concentration risk. It added five new countries in FY25, taking its total count to 84. It expects exports' contribution to revenue to touch 30% by FY30, from 6% in FY25.
Competition from giants
On the flip side, the spectre of increased competitive intensity looms in the domestic W&C segment with the entrance of UltraTech Cement Ltd and Adani Group. For now, Polycab's management doesn't seem perturbed by this. It feels, given the significant unorganised presence in the sector and healthy industry growth, that the entry of new companies will drive market-share gains for the organised segment.
'While competitive intensity may rise, Polycab is well-positioned to navigate these challenges, owing to its strong brand equity, execution capabilities, and global presence. That said, margin protection beyond FY28 could emerge as a risk as the industry landscape evolves," said a Nirmal Bang Institutional Equities report dated 7 May.
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The stage is set for Polycab to continue its momentum, at least for the next couple of years. The stock now trades at 38 times estimated FY26 earnings, as per Bloomberg data. Valuations are not exactly cheap, and investors will assess the delivery when deciding whether to stay plugged in.
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