Polycab's Q1FY26 beat, near-term prospects baked in its rich valuation

Polycab's Q1 FY26 revenue and profit grew 26% and 50% YoY, driven by strong performance in its C&W and FMEG segments. However, the stock's rich valuation factors in its near-term prospects

In the first quarter of the financial year 2026 (Q1FY26), Polycab’s revenue beat consensus, growing 26 per cent year-on-year (Y-o-Y) to ₹5,910 crore.

 

The cable & wire (C&W) segment grew 31 per cent and fast moving electrical goods (FMEG) segment grew 18 per cent on year. The Ebitda (earnings before interest, taxes, depreciation, and amortisation) rose 47 per cent Y-o-Y to ₹860 crore and the margin was up 210 bps Y-o-Y to 14.5 per cent.

 

The profit after tax (PAT) grew 50 per cent Y-o-Y to ₹590 crore. Overall gross margin stood at 26.9 per cent versus 24.6 per cent in the year-ago quarter.

 

In C&W segment, domestic business grew 32 per cent Y-o-Y to ₹5,230 crore, with cables outperforming wires. International business grew 24 per cent Y-o-Y, on a low base. Exports accounted for 5.2 per cent of overall revenue versus 5.3 per cent in Q1FY25. EBIT margin improvement was led by price revisions, and a favourable product mix. 

 

The FMEG revenue increased 18 per cent Y-o-Y to ₹450 crore and the segment posted EBIT of ₹9.8 crore against a loss of ₹2.8 crore in Q1FY25. Margin improvement was led by gross margin expansion, product mix improvement, and improved operating leverage.

 

But in EPC, the revenue declined 19 per cent Y-o-Y to ₹350 crore, and EBIT declined 31 per cent Y-o-Y to ₹26.8 crore. The EBIT margin dipped 140bp Y-o-Y to 7.7 per cent.

 

 

 

Strong revenue growth in the C&W segment was backed by sustained demand across core sectors. Growth drivers included higher government expenditure, better project execution, and rising commodity prices. In FMEG, the fans segment saw muted performance but lights, switchgears, switches, and conduit pipes & fittings delivered healthy growth, supported by demand from the real estate sector.

 

Solar products had robust growth, more than 2 times Y-o-Y, emerging as the largest category within FMEG. In EPC, management expects annual sustainable operating margin to be in high single-digits over the mid-to-long term.

 

The company is a market leader in C&W, benefiting from capacity expansion and strong margins. The margins were at near-record levels with growth in both C&W and FMEG.

 

Other C&W businesses will likely also post strong earnings, aided by low base due to General Elections. The C&W historical CAGR is 21 per cent so the 32 per cent growth implies a higher trajectory due to sustained demand from channels and institutional business.

 

The EBIT margins in FMEG stood at 4.2 per cent up 250 basis point (bps) driven by premiumisation and operating leverage.

 

A key monitorable would be exports growth both in volume and margins given the uncertain outlook due to tariffs in the USA. Exports also contribute to higher margins so a slowdown here would have a negative impact on margins too. Another monitorable would be FMEG growth rates and margins outlook. In this quarter, project bought-out costs were lower at ₹ 180 crore compared to ₹2.8 billion Y-o-Y, which aided margins. The turnaround in FMEG marks the second consecutive quarter of profits in the segment and augurs well.

 

The Working Capital cycle has improved to 49 days (Inventory days 69 + receivables Days 40 – Payables days 60) from 69 days in Q1FY25. However, quarter-on-quarter (Q-o-Q) it has stretched from 46 in Q4FY25 when receivables were at 34 with inventory at 48 and payables at 36.

 

Historically, the stock has traded in the one-year forward PE band of 35-42 times, and it is near the top end of that range. The stock gained slightly (0.72 per cent) on the results to close at ₹6,934.40 on the BSE.

 

According to Bloomberg, 5 of the 10 analysts polled in the past two days (results announced on Thursday) are bullish, while one is bearish and four are neutral on the stock. Their average one-year target price is ₹7,081.50.