Polycab Q2: Brokerages share price targets, firm says negligible impact of UltraTech's entry into sector

Shares of Polycab India were trading on a flat note even as brokerages gave their views on the stock outlook post Q2 earnings. Polycab said it logged highest ever second quarter & half year revenue, EBITDA & profitability. Brokerage Motilal Oswal pegs a CAGR of 24%/24%/23% in revenue/EBITDA/EPS over FY26-28. It estimates Operating Profit Margin (OPM) to be at 14% in FY27/FY28E.

"We estimate a cumulative capex of Rs 2600 crore over FY27-28E against Rs 2450 crore over FY25-26. The company’s net cash balance is estimated to increase to Rs 7130 crore in FY28E against Rs 4150 crore in FY26. The stock trades at 34x/31x FY27E/FY28E EPS. We value Polycab at 40x FY28E EPS to arrive at a target price of Rs 10,600. Reiterate BUY." said Motilal Oswal.

JM Financial has an 'add' call on the stock with a target price of Rs 9200 against a earlier target of Rs 9550.

"We factor in Polycab’s Q2 performance with a 9%/4%/2% upgrade in our FY27/28/29E earnings per share estimates. However, we believe that given a very high base as we move into H2 and benefits emanating from higher input prices ceasing, Polycab could underperform peers. On the back of that we cut our target P/E multiple to 35x (37x earlier) and maintain ADD with a TP of Rs 9,200, pegged to September 28E EPS," said JM Financial.

Management commentary suggested that UltraTech Cement’s entry into the cables and wires (C&W) segment would have a negligible impact on Polycab.

According to the management, UltraTech’s initial foray is focused on wires, a relatively smaller part of Polycab’s business. It noted that wires account for around 30% of the estimated Rs 1.1 lakh crore industry, while the unorganised sector contributes approximately 30–35% of the overall market. This leaves sufficient headroom for a new entrant to gain market share without necessarily impacting Polycab’s existing business.

Management also indicated that the competitive threat is likely to be greater for players with a higher exposure to wires. However, the actual impact will depend on UltraTech’s ability to execute its expansion plans. Polycab, meanwhile, does not intend to respond with pricing measures and plans to maintain its existing price premium over peers.

On Thursday, Polycab India reported a 43% YoY rise in Q2 net profit. Profit rose 43% to Rs 990 crore in the last quarter against Rs 692.95 crore in the year ago period. Revenue in the last quarter rose 53% to Rs 9898.9 crore against Rs 6477.2 crore from last year .

Operating EBITDA climbed 39% year-over-year to Rs 1422.5 crore. PAT margins improved by 260 bps YoY and 50 bps QoQ to 10.7%.

Polycab India Limited is the country's largest manufacturer of wires and cables. The company's business operations span across India through 23 manufacturing facilities, 15 plus offices and 25 plus warehouses.