Jefferies Raises Polycab Target Price To ₹9,230, Maintains Buy On LG India Amid Sector Optimism

Jefferies remains constructive on India's consumer durables sector, highlighting a favorable medium-term demand outlook across cables, wires, and air conditioners. Despite near-term margin pressures from rising raw material costs and rupee weakness, the brokerage advocates a selective approach with Polycab and LG Electronics India emerging as top sector picks.

Polycab: Strong Structural Opportunity in Cables Segment

Jefferies maintained a Buy rating on Polycab India and raised its target price to ₹9,230 from ₹8,960, citing strong structural opportunities in the cables and wires segment. The brokerage expects 2026 to be a "sweet spot" for the industry, driven by healthy demand from industrial capex and housing, alongside 6-8% price hikes to offset higher copper costs.

The demand-supply dynamics present a compelling investment case:

Jefferies estimates this supply-demand imbalance, combined with price hikes implemented during October-December 2025, will support margins and near-term volumes through channel restocking. For Polycab specifically, the brokerage pencils in 15-20% year-on-year sales growth in FY27E for the cables segment.

Air Conditioner Segment: Recovery Opportunity Ahead

Within air conditioners, Jefferies sees recovery opportunity following weak fiscal 2026 performance, when industry sales declined 15-20% in the first half due to unseasonal monsoons and GST-related demand deferrals. The brokerage notes that historically, excess rainfall rarely persists for two consecutive years during the critical March-May period, while mean temperatures continue trending higher.

Inventory levels have normalized to around 45 days from peaks of nearly 60 days earlier, aided by revisions in BEE norms helping clear older stock. Against this backdrop, Jefferies expects normal summer in 2026 to act as a key catalyst for LG India, Voltas, and Blue Star.

Margin Pressures From Rising Input Costs

The brokerage flagged rising raw material costs as a key headwind for margins across consumer durables. Copper and aluminum prices rose 21% and 10% year-on-year respectively in Q3 FY26E, while the rupee weakened around 5% between July and December 2025.

Given that compressors, largely imported, account for 25-30% of an air conditioner's bill of materials, Jefferies expects lag in price pass-through, leading to near-term margin pressure in second half of FY26E. However, it estimates the earnings impact to be relatively modest at 2-5% over FY27-28E.

Emerging Growth Drivers: Data Centers and Solar

Beyond core appliances, Jefferies highlighted data centers and solar products as emerging growth drivers. Blue Star and Voltas, which provide mechanical, electrical and plumbing solutions for data centers, are well positioned. Data centers already form about 20% of Blue Star's order book and are expected to contribute up to 30% of Voltas' projects revenue over the medium term.

Data centers also create incremental demand for power and optical fiber cables, benefiting players such as Polycab. On solar, government-led schemes such as PM Surya Ghar and PM Kusum are driving opportunities across rooftop solar, pumps and related products, with several consumer durable companies gradually building exposure.

Jefferies maintained a Hold rating on Havells and cut its target price to ₹1,560 from ₹1,620, citing margin sensitivity to raw material volatility.