Polycab Jumps 5%! Why Jefferies Predicts a 30% Rally Even with Ultratech’s Entry
Polycab India’s share price staged a strong recovery on Monday, rebounding nearly 5% during intraday trading. This comeback follows a sharp decline on Friday, when shares of Polycab and other cable and wire (C&W) manufacturers faced significant selling pressure after news emerged that UltraTech Cement was entering the segment.
The dip in stock prices last week was driven by concerns over heightened competition in the industry. However, Monday’s gains suggest that investor sentiment may have been lifted by a recent report from Jefferies India Pvt Ltd. The global brokerage firm stated that it does not anticipate UltraTech’s entry to have a major impact on Polycab India’s business prospects. Instead, Jefferies remains optimistic about Polycab’s growth trajectory and projects a potential upside of over 30% for the stock from current levels.
The rebound in Polycab’s stock indicates that investors may be reassessing the competitive landscape, factoring in the company’s market position, product portfolio, and long-term growth potential despite new entrants in the segment.
Polycab India’s share price opened on a strong note on Monday, starting at ₹4,849.95 on the Bombay Stock Exchange (BSE), which was nearly 3% higher than its previous closing price of ₹4,710.65. As the trading session progressed, the stock continued its upward momentum, reaching an intraday high of ₹4,937.50. This marked an impressive recovery of almost 5% from the previous close, indicating renewed investor interest after a sharp decline in the past sessions.
Why Jefferies Remains Bullish on Polycab India
1. Market Leadership and Strong Presence in the C&W Segment
Jefferies India Pvt Ltd remains optimistic about Polycab India, citing its dominant position in the domestic cables and wires (C&W) market. The company holds an estimated 25% share in the organized segment, making it a key player in the industry.
Polycab has a well-diversified product mix, with approximately 65% of its revenue coming from cables and around 25–30% from wires. This broad market presence allows the company to cater to various customer needs across residential, commercial, and industrial sectors.
Despite the company’s strong fundamentals, its stock had witnessed a steep decline of over 20% in the last two trading sessions. The downturn was largely attributed to concerns over increased competition following UltraTech Cement’s announcement of its entry into the C&W segment. However, Jefferies believes these concerns may be overblown, as it does not foresee a significant impact on Polycab’s long-term growth trajectory.
This perspective has likely contributed to renewed investor confidence, helping the stock rebound sharply on Monday.
Polycab India’s stock is currently trading below its historical valuation levels, with a price-to-earnings (P/E) ratio of 27 times its projected earnings for the fiscal year 2026 (FY26). Despite recent fluctuations in share price, analysts at Jefferies remain optimistic about the company’s growth trajectory over the next few years.
According to Jefferies, Polycab is expected to witness strong financial performance between FY25 and FY27. The brokerage estimates that the company will achieve a compound annual growth rate (CAGR) of 22% in sales and 28% in net profit during this period. Several key factors are expected to drive this growth, including:
• Expansion in the Fast-Moving Electrical Goods (FMEG) segment: Improvements in operating margins within the FMEG division are anticipated to contribute positively to the company’s profitability.
• New business opportunities: Large-scale infrastructure projects, such as the Bharat Net initiative, are expected to generate fresh orders, further boosting revenue.
• Higher demand in the cables and wires (C&W) segment: Increased demand for C&W products, driven by infrastructure development and industrial expansion, is likely to support volume growth.
These factors indicate that Polycab is positioned for consistent business expansion in the coming years, backed by operational improvements and a growing market presence.
2. Positive Medium-Term Outlook for Polycab India
Polycab India has outlined an optimistic growth strategy for the next five years, driven by its recently launched Project ‘Spring’. This initiative provides a clear roadmap for expansion, efficiency improvements, and financial sustainability. The company has set several key targets aimed at strengthening its market position and enhancing profitability:
1. Strong Growth in the Cables & Wires (C&W) Segment: Polycab aims to grow its C&W business at approximately 1.5 times the market growth rate in its core product categories. This suggests that the company expects to outperform industry trends and capture a larger market share over time.
2. Expansion in Key C&W Categories: Similar to its core C&W business, Polycab is targeting growth of 1.5 times the market rate in select high-potential subcategories within the segment, ensuring a broader and more diversified revenue stream.
3. Sustained Profitability in C&W: The company has set a target EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin of 11–13% for its C&W business. Maintaining strong margins in this segment will be crucial for long-term profitability and stability.
4. Improved Margins in the Fast-Moving Electrical Goods (FMEG) Segment: Polycab expects to achieve EBITDA margins of 8–10% in its FMEG division, indicating a focus on improving efficiency and profitability in this category.
5. Significant Capital Expenditure (Capex): The company plans to invest ₹6,000–8,000 crore over the coming years, signaling its commitment to expanding manufacturing capacity, enhancing product innovation, and scaling operations.
6. Consistent Dividend Payouts: Polycab aims to maintain a dividend payout ratio of more than 30%, reflecting its intent to return value to shareholders while balancing reinvestment in growth initiatives.
7. Rising Export Contribution: The company is targeting exports to contribute over 10% of total revenue, highlighting its focus on expanding its global footprint and tapping into international markets.
Through Project ‘Spring,’ Polycab has laid out a structured plan for sustained growth, profitability, and financial discipline, reinforcing its long-term vision for success in both domestic and international markets.
3. Expanding Export Opportunities for Polycab India
Polycab India has been steadily strengthening its presence in international markets, with exports playing an increasingly important role in its overall revenue mix. The company’s key export destinations include the United States, the Middle East, Europe, and Australia, reflecting its strategic focus on regions with strong demand for high-quality cables and electrical solutions.
During the first nine months of the FY25 fiscal year (April–December 2024), exports contributed approximately 7–8% of Polycab’s total sales. This demonstrates the company’s growing global reach and its ability to compete in international markets alongside established players.
In the United States, Polycab is transitioning towards a distribution-led model, which involves leveraging established distribution networks to enhance market penetration and improve supply chain efficiency. This strategic shift is expected to help the company expand its customer base and increase sales in one of the world’s largest electrical and infrastructure markets.
Looking ahead, Polycab has set an ambitious target for its export business. By FY30, the company expects exports to contribute around 10% of its total revenue, highlighting its commitment to expanding its global footprint and capitalizing on opportunities in international markets. This growth will likely be driven by strategic partnerships, product innovation, and increased investments in global distribution channels.
4. Jefferies’ Perspective on UltraTech’s Entry and Polycab’s Valuation Adjustments
Jefferies India Pvt Ltd has analyzed the potential impact of UltraTech Cement’s entry into the cables and wires (C&W) segment and has stated that it does not expect any significant effect on Polycab India’s earnings in the near term. According to Jefferies, UltraTech’s new venture in this space is unlikely to influence Polycab’s financial performance until at least 2027, suggesting that any competitive pressures will take time to materialize.
However, while Jefferies remains positive about Polycab’s growth prospects, it has adjusted its valuation metrics for the stock. The brokerage has reduced its target price-to-earnings (P/E) multiple by approximately 15%, bringing it down from 38 times to 32 times. This revision aligns Polycab’s valuation with its five-year historical average, reflecting a more conservative outlook amid broader market uncertainties and potential competition from new entrants post-2027.
Taking these factors into account, Jefferies has revised its target price for Polycab India to ₹6,485. This suggests a potential upside of over 30% from the stock’s recent trading level of approximately ₹4,900.
Despite the optimistic long-term outlook, Jefferies has also highlighted key risks that could affect Polycab’s performance, including:
• Increased competition in the C&W segment, which could put pressure on market share and pricing strategies.
• A potential slowdown in demand, which could impact sales volumes and revenue growth.
While the firm acknowledges these challenges, its revised target price indicates confidence in Polycab’s ability to navigate market dynamics and sustain growth over the coming years.
