Polycab India has received a buy rating from Prabhudas Lilladher with a revised target price of ₹9,744, reflecting the brokerage's confidence in the company's strong operational performance and growth prospects. The target represents a marginal revision from the earlier price of ₹9,781.

Strong Wires & Cables Segment Performance

The company's Wires & Cables (W&C) segment demonstrated robust growth momentum with domestic volume growth of approximately 40%, accompanied by realization improvement. The domestic W&C business recorded impressive year-on-year growth of 59%, driven by strong performance across product categories.

The exceptional wires growth was attributed to a low base effect, channel restocking amid elevated copper prices, and market share gains. W&C capacity utilization reached early 80% in Q3FY26, while the international business contributed 6.0% to total revenue with 5% YoY growth.

FMEG Segment Delivers Positive Results

The Fast Moving Electrical Goods (FMEG) segment continued its positive trajectory, delivering another quarter of positive EBIT margin at 2.9%. This performance was primarily led by solar products, which registered 2x growth and are expected to maintain faster growth in the coming years.

Margin Pressures and Recovery Outlook

EBITA margins faced temporary pressure due to high advertising and promotional expenses and one-off costs related to gratuity provisioning following the implementation of new labor codes. However, the company expects margins to normalize and return to the guided trajectory under Project Spring in the upcoming quarter.

Financial Projections and Valuation

Prabhudas Lilladher projects strong financial performance for Polycab India over the forecast period FY26-28E. The brokerage expects sustained growth across key financial metrics, supported by the company's strategic initiatives and market positioning.

The target price of ₹9,744 is based on Sum of the Parts (SOTP) valuation methodology, implying a price-to-earnings ratio of 40x FY28E. This valuation reflects the brokerage's confidence in the company's ability to execute its Project Spring strategy and achieve targeted margins of 8-10% EBITDA in the FMEG segment by FY30.

Polycab India shares gained up to 5% on Monday following the company's strong third-quarter results, with the country's largest wires and cables manufacturer delivering impressive revenue growth despite margin pressures. The Mumbai-based company's revenue surge of 46% year-on-year significantly exceeded analyst estimates of around 30%.

Strong Financial Performance with Revenue Beat

Polycab reported robust financial metrics for the December quarter, demonstrating strong demand across its core business segments:

The revenue surge was primarily driven by strong volume growth in the cables and wires business, with the segment achieving 46% year-on-year growth supported by continued momentum from private capex, housing demand, and restocking activities.

Margin Pressures Across Key Segments

Despite strong top-line performance, operating margins came under pressure, declining to a five-quarter low due to rising operational expenses:

Cost pressures included significant increases in advertising and sales promotion expenses, which rose 144% to ₹91.00 crore, and finance costs that increased 38% to ₹69.00 crore. Management indicated that margin pressure resulted from deferred pass-through of input costs, unfavorable product mix, and higher advertising spends.

Management Outlook and Strategic Initiatives

Management expressed confidence in sustained growth momentum, stating that strong performance is expected to continue into the March quarter. The company has already implemented price hikes in January with further increases planned within the quarter to support sequential margin expansion, though margins may still decline on a year-on-year basis.

The company reported no demand impact despite sharp rises in commodity prices, while EPC operating margins are expected to remain in high single digits over the medium to long term. The FMEG segment continued to deliver positive EBIT, contributing to overall performance.

Upgraded Brokerage Targets Reflect Confidence

Leading brokerages maintained constructive views and raised target prices following the results:

Citi reiterated its Buy rating while raising the target price to ₹9,500, highlighting the strong revenue beat and structural tailwinds from infrastructure development and power capacity expansion.

Jefferies maintained its Buy rating with a ₹9,225 target, noting that despite a nearly 50% rally since March, the stock still trades at a slight discount to its five-year average valuation. The brokerage views Polycab as a play on private capex, housing, and infrastructure, estimating an EPS CAGR of 25% over FY25-28.

Morgan Stanley maintained its Overweight rating, pointing to strong volume-led growth in the cables and wires segment while acknowledging margin pressures from cost inflation and higher advertising expenses.

Market Position and Growth Drivers

Polycab's performance reflects its strong market position with an extensive manufacturing footprint of 23 facilities across India, supported by over 15 offices and more than 25 warehouses. The company benefits from structural demand drivers including infrastructure investment, renewable energy expansion, and real estate sector recovery.

Key factors supporting future growth include continued private capex momentum, housing demand recovery, power transmission requirements, and renewable energy infrastructure development. The company's ability to navigate cost inflation while maintaining market share positions it well for sustained growth despite near-term margin challenges.