Polycab Soars Again! Stock Extends Rally, Morgan Stanley Foresees 52% Surge

Shares of Polycab India, the country’s largest manufacturer of cables and wires, continued their upward momentum for the fourth consecutive trading session. On March 5, the stock surged 3.5% in intraday trade, reaching ₹5,078 per share. The rally comes after global brokerage firm Morgan Stanley reiterated its bullish outlook on the company, citing robust demand in the cables and wires sector.

Morgan Stanley emphasized that despite UltraTech Cement’s entry into the segment, the overall industry impact is expected to be minimal. The brokerage firm maintained its ‘Overweight’ rating on Polycab and set a target price of ₹7,395, suggesting a potential upside of 52% from the stock’s last closing price.

Polycab has been witnessing strong investor confidence, driven by consistent growth in its core business, favorable industry trends, and expectations of sustained demand. The company remains a key player in India’s expanding infrastructure and electrical solutions market, positioning itself well for future growth.

Global brokerage firm Morgan Stanley has observed a notable surge in demand within the cables and wires (C&W) segment during the fourth quarter of the financial year. This increased demand reflects the sector’s strong performance in both domestic and international markets, reinforcing positive growth trends for key industry players like Polycab India.

In addition to the domestic demand surge, exports have also shown encouraging growth, indicating rising global interest in Indian-manufactured cables and wires. This trend suggests that Indian companies are gaining a stronger foothold in overseas markets, further expanding their revenue streams.

Furthermore, Morgan Stanley pointed out that Indian C&W manufacturers could stand to benefit from the recent import tariffs imposed by the United States on certain peer countries. These tariffs may reduce competition from international suppliers, potentially creating new opportunities for Indian firms to capture a larger share of the U.S. market. This shift could serve as an additional growth catalyst for Indian players in the sector, complementing their already strong domestic performance.

Morgan Stanley has highlighted that movements in copper prices, which are closely linked to inflationary trends, are likely to play a key role in supporting higher realizations for the cables and wires (C&W) segment during the fourth quarter. Since copper is a primary raw material in the manufacturing of cables and wires, fluctuations in its price can have a direct impact on revenue growth. In this case, rising copper prices are expected to contribute positively to Polycab’s financial performance by enhancing realizations per unit sold.

On the competitive front, Morgan Stanley anticipates limited industry impact over the next 4-5 years, despite the planned entry of UltraTech Cement into the cables and wires market. The brokerage noted that UltraTech’s expansion into this segment will likely be gradual, as scaling up cable manufacturing requires a long gestation period due to high capital investment and technical complexities. While the wires segment has a relatively shorter approval process, achieving widespread market penetration depends on building strong relationships with electricians and contractors, which takes time.

Polycab has also been making significant investments to strengthen its market position. The company’s ₹18 billion investment accounts for approximately 10% of the current C&W industry size and is projected to represent 3-4% of the industry’s estimated size by FY31. This investment underscores Polycab’s long-term strategy to expand its capabilities and meet the growing demand in both domestic and international markets.

Regarding profitability expectations, Morgan Stanley forecasts that Earnings Before Interest and Tax (EBIT) margins for the C&W segment will remain within the 12-14% range in the near term. Over the longer term, these margins are expected to stabilize between 11-13%, reflecting a steady and sustainable profitability outlook as the industry evolves.

Global brokerage firm Jefferies has also weighed in on UltraTech Cement’s entry into the cables and wires (C&W) market, stating that it does not expect any major disruption to existing players, including Polycab India. Despite maintaining a positive outlook on the company, Jefferies has trimmed its target price to ₹6,485 per share, citing concerns over rising competition beyond 2027 as the market evolves.

Polycab’s stock has faced significant volatility in recent months, tumbling 33% over the last three months. A major turning point came on February 27, when the company witnessed its sharpest single-day drop in 13 months, plunging 19% after UltraTech announced its foray into the cables and wires segment. UltraTech’s move is part of its broader strategy to become a comprehensive ‘Building Solutions’ provider, raising concerns about potential long-term competition in the industry.

The sell-off continued through February, with Polycab’s stock closing the month with a 22% decline, marking its third consecutive month of losses. The sustained downward trend reflects investor concerns over UltraTech’s entry, despite multiple brokerage firms asserting that the near-term impact on Polycab and other key players in the C&W industry is expected to be limited.

Polycab India’s stock has undergone a significant correction in recent months, falling 33% from its December peak of ₹7,595 per share. This decline reflects recent market volatility and investor reactions to competitive developments in the cables and wires industry.

However, despite this sharp pullback on Dalal Street, the stock has demonstrated strong long-term growth. Over the past three years, Polycab’s share price has surged 124%, showcasing its steady expansion and market performance. Looking at a broader timeframe, the stock has delivered an impressive 400% return over the last five years, highlighting its consistent growth trajectory and ability to navigate industry dynamics over time.

The cables and wires industry has witnessed significant expansion in recent years, fueled by multiple factors contributing to rising demand across domestic and international markets. A key driver of this growth has been the Indian government’s strong focus on infrastructure development, which has led to increased investments in power transmission, smart cities, and urban modernization projects.

Another contributing factor is the changing household structure, with the rising trend of nuclear families creating greater demand for residential housing and, consequently, for electrical wiring and cabling solutions. Additionally, efforts to improve rural electrification have gained momentum, with expanding electricity access leading to higher consumption of cables and wires in previously underserved regions.

Beyond domestic growth, the industry has also benefited from a surge in exports, as Indian manufacturers gain a stronger foothold in global markets. Increasing demand for high-quality and cost-effective cabling solutions has allowed Indian companies to expand their international presence, further driving growth in the sector.