Polycab India shares fell 7% in early trading on Friday after the major wire and cable manufacturer reported Q2 profits that were in line with expectations. Polycab India's shares fell 6.91% to Rs 6987.85 today, compared to the previous closing of Rs 7102.40 on BSE. Total 0.27 lakh shares of the company changed hands, resulting in a turnover of Rs 18.66 crore. The firm's market capitalization plummeted to Rs 1.04 lakh crore on the BSE.

Polycab India's shares are trading below the 5-day and 10-day moving averages, but above the 20-day, 30-day, 50-day, 100-day, and 200-day moving averages.

Polycab reported a 3.6% year-on-year (YoY) increase in net profit to Rs 445.2 crore in the quarter ended September 2024, compared to Rs 429 crore. Revenue from operations increased by 30.4% to Rs 5,498.4 crore in the fourth quarter, up from Rs 4,218 crore in the same time the previous fiscal year. 

Total income increased to Rs 5,574.6 crore in the fourth quarter, up from Rs 4,253 crore the previous year. In the June quarter, the firm generated total income of Rs 4756.4 crore.

Expenses in Q2 increased to Rs 4,984 crore from Rs 3695.9 crore in the same time last year.

The fast moving electric goods (FMEG) business grew 18% year on year, driven by efforts such as channel development, product architectural enhancements, and strong execution of the influencer management program, according to the firm.

Jefferies has issued a 'buy' rating to Polycab India, with a target price of Rs 8,315 per share.

Growth in the wires industry exceeded that of cables. However, greater competition and changes in the product mix weighed on operational profit margins, according to the global brokerage. The Fast-Moving Electrical Goods (FMEG) category had a solid 18% sales increase, but losses persisted, it noted.

ICICI Securities has set a price objective of Rs 6790, which is down 5% from the previous closing. However, the current price goal is greater than the previous Rs 6,400. 

"We expect Polycab to post a revenue/PAT CAGR of 18.5%/19.4% from FY24-27E, with a RoCE of 20% in FY27E. The firm maintained its HOLD rating with a revised DCF-based target price of Rs 6,790 (formerly Rs 6,400; implied P/E of 39x FY26E EPS). 

"The FMEG division recorded substantial sales growth at the cost of profitability. We believe the trend will continue in the short future, as the firm seeks to increase its market share. (4) The capex intensity has remained high. Polycab is on target to invest INR 10-11 billion in FY25, with INR 5.8 billion on capital until September 24," it added.  

Nuvama Institutional Equities has assigned the stock a buy rating with a price objective of Rs 8,340. 

"Exports increased 36% quarter over quarter, providing 6.1% to the topline. Working capital days increased to 44 days (vs. 61 days QoQ) as payables days rose. Revenues during 1HFY25 surpassed INR 100 billion, the highest in the company's history. We have a BUY recommendation on the company, based on 48x Dec-26EPS, with a price objective of Rs 8,340," Nuvama stated in its earnings review report. 

Key risks to the brokerage's projections include a slowdown in government and private capital investment. Polycab's FMEG business is suffering as customer demand remains poor. Copper prices have fallen significantly, resulting in lower revenue growth.

Inder T. Jaisinghani, Chairman and Managing Director of Polycab India, stated, "We completed the first half of the fiscal year on a good note, producing our highest-ever second quarter and half-year sales and profit, driven by healthy market demand. Furthermore, CRISIL has raised its rating on our long-term bank facilities to "CRISIL AAA/Stable," demonstrating our outstanding financial performance, market leadership, and long-term growth potential. Looking ahead, we anticipate that demand will remain strong, fueled by rising government expenditure, continuing private sector investment, and solid real estate offtake. With a strong emphasis on operational efficiency, we are well positioned to seize emerging opportunities and deliver consistent development."

Polycab India Limited is India's largest wire and cable maker and one of the fastest-growing FMEG firms, with consolidated sales of Rs 122 billion in FY22. The company's business operations are spread across India, with 23 production sites, 15+ offices, and 25+ warehouses.