Polycab warns of mid-single digit near-term volume growth but medium-term outlook positive

Shares of Polycab India Ltd., in a meeting with brokerage firm Nirmal Bang, has warned that volume growth could moderate to mid-single digits in the near-term, even as value growth guidance remains intact and the medium-term outlook remains positive. The company also expects to grow ahead of industry.Nirmal Bang cited an interaction with the management of Polycab, who highlighted that the demand for wires and cables remains strong across multiple end-user industries, supported by government infrastructure spending. The management also expects the domestic cables and wires industry to grow at nearly 2x the real GDP, implying an industry growth rate of 13%.

Polycab is expanding its EHV cable capacity from 220kV to 550kV, with operations set to commence at the end of the calendar year, and revenue accrual from next year. Nirmal Bang said that the 50% of the needs of the ₹3,500 crore domestic EHV market is met through imports, thereby creating a strong import-substitution opportunity for the company.
Nirmal Bang maintained its “hold” rating on Polycab with a price target of ₹7,790. The brokerage has valued the stock at 33 times December 2027 estimated Earnings Per Share (EPS), which is a near 5% premium to its five-year historical average.The brokerage said that the multiples adequately capture a 24% Earnings Per Share (EPS) CAGR, a post-tax Return on Capital Employed (RoCE) of 22% in financial year 2028 and the strong tailwinds in the cables space.

“We remain structurally positive on the company’s long-term business prospects and believe it is a long-term compounder, and therefore, should be accumulated on every dip,” the brokerage said.On another note, copper is estimated to witness a supply shortage over the next 15 years, while the existing supply constraints put pressure on markets. Copper is a key raw material for the firm.

Analysts have cautioned that the copper price volatility poses a significant risk to future offtake of wires and cables, especially the latter, which comprises nearly two0thirds of the overall sector.

Earlier, Polycab’s management had highlighted that copper accounted for 50% to 60% of its overall raw material costs and those prices had increased in the December quarter,w hen global rates had hit a record high. Polycab has now passed on the entire increase, which will lead to margin recovery during the fourth quarter.

Shares of Polycab India were down 4% at ₹7,414 apiece around 1.10 pm. The stock is down over 10% in the last two trading sessions.

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