POLYCAB - Polycab India Limited Share Price

Management Outlook and Major Points from Polycab's Q3 FY25 Earnings Call:

Outlook:

• Project Spring (FY25-FY30): Focused on 6 strategic pillars to capitalize on India's infrastructure upcycle and global demand. Targets include growing 1.5x the wires/cables market (expected at 1.5"“2x GDP), increasing international business contribution to >10%, achieving 8"“10% EBITDA margins in FMEG, and ramping up Rs.60"“80 billion capex (asset turns: 4"“5x).
• Macro Environment: Expect transient economic slowdown to reverse with rising government/private capex, real estate growth, and potential RBI rate cuts in 2025.

Key Highlights:

1. Financial Performance:

   • Q3 Revenue: +20% YoY; EBITDA: +26% YoY (margin: 13.8%, up 70 bps YoY).
   • Wires & Cables: +12% YoY (domestic cables strong; wires impacted by copper price volatility).
   • FMEG: +45% YoY (losses reduced via margin expansion).
   • International Business: +62% YoY (8.3% of revenue).

2. Demand Drivers:

   • Wires/Cables: Rebound expected in Q4 with normalized channel inventory. Long-term growth tied to infrastructure, EVs, data centers, and renewables.
   • FMEG: Leveraging real estate demand, channel expansion, and new SKUs (130+ launched).

3. Strategic Initiatives:

   • International Expansion: Targeting U.S., Middle East, Europe; approved BharatNet and EHV projects.
   • EPC Business: Rs.48 billion order book; margins to stabilize at high single digits.
   • Dividend Payout: Aim to increase to >30% by FY30 (vs. 26.5% now).

4. Leadership & Governance: Board reorganization with new Executive/Independent Directors.

Risks/Mitigations: Focus on innovation, vertical-specific teams, and ESG integration to sustain margins (11"“13% in wires/cables).

Question 1:
Ravi Swaminathan (Avendus Spark): "Given softness in government capex, how do you see industry growth over the next 6"“12 months? Are inquiries slowing?"
Answer: Demand remains healthy despite temporary government capex slowdown (linked to elections). Industry is expected to grow at 1.5x"“2x real GDP (10"“14% for 6.5"“7% GDP). Polycab targets 1.5x industry growth (15"“21% revenue growth) via vertical-focused strategies and solutions-based offerings.

Question 2:
Ravi Swaminathan (Avendus Spark): "How is real estate-led wires demand post Q3 destocking?"
Answer: Q3 wires slowdown was temporary (high channel inventory, falling copper prices). Real estate launches/sales are at 12-year highs, driving robust fundamental demand. Inventory normalized, copper prices rising: expect Q4 rebound.

Question 3:
Ravi Swaminathan (Avendus Spark): "Capex allocation (Rs.60"“80B over 5 years) between cables, wires, FMEG?"
Answer: Majority allocated to cables/wires (fungible capacity). FMEG capex minimal (high asset turns, recent capacity expansions).

Question 4:
Pulkit Patni (Goldman Sachs): "Update on U.S. export distribution strategy and progress."
Answer: U.S. contributed ~33% of Q3 exports. Evaluating distribution vs. institutional models; decision in 3"“4 months. Bullish on U.S. as a top-3 export market by FY30.

Question 5:
Achal Lohade (Nuvama): "Any demand weakness in segments? Industry overcapacity risks?"
Answer: No material weakness yet. Industry capex aligned with strong demand (renewables, EVs, real estate). Larger players dominate capacity additions; exports absorb excess. Polycab's Rs.60"“80B capex targets 4"“5x asset turns.

Question 6:
Achal Lohade (Nuvama): "Export approvals for U.S. addressable market?"
Answer: Approved for targeted SKUs; U.S. approvals cover most strategic products. Market share gains depend on pricing/policy (e.g., potential Mexico tariffs).

Question 7:
Akshay Gattani (UBS): "Updates on expansion projects, especially EHV cables."
Answer: EHV plant (Rs.6"“7B capex) commissioning by FY26-end, contributing from FY27. Asset turns ~4x; gradual revenue ramp-up.

Question 8:
Shrinidhi Karlekar (HSBC): "Impact of rooftop solar adoption (Surya Ghar Yojana)?"
Answer: Strong traction in solar cables, inverters, panels. FMEG growth driver; adding SKUs to capitalize. Forex loss (Rs.31Cr) linked to rupee depreciation, factored into EBIT.

Question 9:
Shrinidhi Karlekar (HSBC): "Export growth drivers (U.S. vs. others)?"
Answer: Growth across U.S., Middle East, Europe, Australia. Order book diversification; entering Asian markets.

Question 10:
Amit Mahawar (UBS): "Export contribution target (10%+) and EHV revenue potential?"
Answer: Exports to grow faster than domestic, but domestic base expansion limits % contribution. EHV revenue clarity post-FY27 commissioning.

Question 11:
Niket (MOAMC): "Impact of U.S. tariffs on Mexico? E-beam tech adoption?"
Answer: Potential upside if U.S. imposes tariffs (India's 3"“5% vs. Mexico's 0%). E-beam tech used for premium wires/cables; expanding product launches.

Question 12:
Niket (MOAMC): "Why maintain 11"“13% margins despite export growth?"
Answer: Long-term sustainable range; mix-dependent. Aim to overdeliver if conditions favor.

Question 13:
Praveen Sahay (Prabhudas Lilladher): "EPC order book and FMEG lighting sustainability?"
Answer: EPC order book: Rs.48B (2"“3 years execution). Margins to normalize to mid/high-single digits. FMEG lighting growth driven by distribution expansion, not just seasonality.

Question 14:
Renu Pugalia (IIFL): "Cables/Wires mix and YTD volume growth?"
Answer: Cables >75% of mix. YTD cables: double-digit volume; wires: single-digit. Overall C&W volume: double-digit.

Question 15:
Aniruddha Joshi (ICICI): "FMEG market share targets, regional strategy, quick commerce presence?"
Answer: Target top-3 positions across FMEG categories. Regional focus: broaden penetration beyond stronghold West. E-commerce/quick commerce integration underway via tailored GTM strategies.