Polycab India remains a formidable force in the cables and wires (C&W) segment, despite increasing industry competition. Sharekhan has reiterated a ‘Buy’ call on the stock with a price target (PT) of Rs. 7,300, citing strong fundamentals, aggressive expansion plans, and favorable sectoral tailwinds. The company is poised for 20% revenue CAGR and 21% PAT CAGR from FY2024 to FY2027 with a robust return on capital employed (RoCE) of 32%.

While UltraTech Cement's entry into the C&W industry with a Rs. 1,800 crore investment initially caused investor concerns, Polycab's leadership position (25-26% market share) and its diversified portfolio minimize any significant threat. The company has outlined an ambitious SPRING project, which targets 1.5-2x higher growth than the industry, sustained margin improvement, and an aggressive capex outlay of Rs. 6,000-8,000 crore over five years.

UltraTech Cement’s Entry: Limited Impact on Polycab's Dominance

UltraTech Cement's foray into the C&W segment through a Rs. 1,800 crore capex investment in Bharuch, Gujarat, is aimed at leveraging its existing distribution network and tapping into the high-growth wires industry. The company expects full capacity utilization by FY2030-31, generating revenues between Rs. 7,500-9,000 crore.

However, Polycab’s stronghold in the high-voltage and extra-high-voltage (HT and EHV) cables market shields it from UltraTech’s focus on house wires and low-tension (LT) cables. With an expected UltraTech market share of just 5% by 2032, Sharekhan believes the impact on Polycab will be marginal.

SPRING Project and Expansion Plans: Fueling Long-Term Growth

Polycab has unveiled its SPRING project, an ambitious strategy aimed at sustaining growth at 1.5-2x the industry rate. Key objectives include:

Revenue Growth Target: CAGR of 15-20% over the next five years.
Export Expansion: Overseas sales to constitute 10% of total revenue.
C&W Margin Guidance: 11-13% operating margin, with an 8-10% margin for the FMEG business.
Capex Outlay: Rs. 6,000-8,000 crore investment over five years, primarily to enhance capacity and innovation.
The company is constructing a new EHV cable facility in Halol, Gujarat, slated for completion by FY2026. This will boost asset turnover to 4-5x while maintaining a mid-teen operating margin.

Strong Q3 Performance: Earnings Outperform Market Expectations

Polycab's Q3 FY2025 results exceeded expectations, demonstrating a 20% YoY revenue growth led by:

C&W segment growth of 12% YoY
FMEG segment surging by 43% YoY
Other businesses expanding by 101% YoY
Operating profit rose 28% YoY to Rs. 726 crore, while PAT climbed 14% YoY to Rs. 471 crore, driven by higher margins and efficiency improvements.

Valuation: Attractive Entry Point for Long-Term Investors

Stock Price: Rs. 5,071
Target Price: Rs. 7,300
Upside Potential: ~44%

Despite a recent 30.9% decline in the last three months, the fundamentals of Polycab remain robust. The company’s leadership in the Rs. 90,000-95,000 crore Indian C&W industry and favorable tailwinds from government-led infrastructure spending (Rs. 111 lakh crore till FY2025) provide long-term growth visibility.

Polycab is currently trading at a FY26E P/E of 29.3x and FY27E P/E of 23.9x, making it an attractive buy opportunity at current levels.

Key Risks to Consider

Despite strong growth prospects, investors should monitor the following risks:

Raw Material Price Volatility: Fluctuations in copper and aluminum prices could impact margins.
Intensifying Competition: New entrants like UltraTech and aggressive market players could pressure pricing.
FMEG Segment Losses: The business needs sustained growth to turn profitable.

Final Verdict: Retain Buy with a Rs. 7,300 Target

Polycab remains a best-in-class leader in the C&W segment, backed by a strong brand, distribution network, and technological advancements. The Rs. 7,300 price target reflects confidence in the company’s ability to outperform the industry, sustain high margins, and deliver long-term shareholder value.