Polycab Shares Drop 17% After UltraTech Entry, Jefferies Forecasts 33% Gain

Polycab Industries has seen its share price decline by 17 percent since June, following the announcement of UltraTech's entrance into the wires and cables market. This development positions Polycab as one of the worst-performing stocks within the sector recently. Despite the price drop, Jefferies maintains a positive outlook on Polycab, projecting a significant increase of 33 percent, with a target price of Rs 11,100 from the recent closing level of Rs 8,369.50.

Jefferies' bullish stance emerged after discussions with Polycab's management during the Jefferies India Forum 2026. The brokerage upheld its 'Buy' rating, noting that the wires and cables industry is anticipated to grow at an annual rate of 11 to 12 percent. Polycab aims to outpace this growth by approximately 1.5 times by diversifying its product portfolio, targeting new customer segments, and expanding its market share.

Power cables constitute around 40 to 45 percent of Polycab’s demand, supported by sectors such as power generation, renewable energy projects, and transmission and distribution networks. Even though copper prices surged by more than 43 percent year-on-year in the second quarter of fiscal 2027, Polycab has not encountered notable demand disruption, as price increases have been effectively absorbed. Demand remains strong across various sectors including power, mobility, industrial infrastructure, and emerging industries. The housing sector, where wires make up roughly 70 percent of demand, continues to show steady growth.

Jefferies estimates that Polycab’s sales will expand at a compound annual growth rate exceeding 20 percent between fiscal years 2027 and 2029. The company has projected double-digit volume growth for most quarters over the next two to three years. In fiscal 2026, Polycab recorded over 18 percent year-on-year volume growth, outperforming many of its competitors in the market.

The brokerage pointed out that while demand fundamentals are solid, the elevated volume base established in the second and third quarters of fiscal 2026 could moderate growth rates. Copper price volatility, which is typically passed through to customers, may influence short-term inventory levels among dealers as they adjust to price expectations.

Jefferies also compared the wires and cables sector with the paints industry, highlighting that launching new SKUs and related products is more straightforward in paints. In contrast, the cables market faces higher barriers due to certification requirements and product complexity. The brokerage noted that operating margins in cables and wires are generally lower and are unlikely to remain suppressed over the long term. Intense competition might restrict prolonged price reductions.

Polycab’s sales mix leans more heavily towards cables than wires. Wires typically require fewer certifications and have lower entry barriers. On the other hand, cables—especially extra-high voltage and specialized variants—must meet strict durability and usage certifications, which are time-consuming to secure. Low voltage and medium voltage cables also demand various standard certifications. Jefferies emphasized that Polycab’s scale and extensive distribution network provide a competitive advantage.

The company’s ability to supply dealer inventory within a single day stands out as a key strength. Polycab has guided operating margins for its cables and wires segment at 11 to 13 percent, factoring in competition and market sensitivities. Jefferies forecasts profit after tax growth exceeding 22 percent annually from fiscal 2026 through fiscal 2029, driven by volume increases and improved margins in the fast-moving electrical goods segment. Capital expenditure is expected to remain in the range of Rs 14 to 15 billion annually during this period.

Since the launch of Ultravolt, Polycab’s share price has dropped 17 percent from its June peak. Currently, the stock trades at a forward price-to-earnings ratio of 35 times, about 7 percent below its five-year average. Jefferies identified risks such as heightened competition, slowing demand, and copper price fluctuations that could affect future performance.

In recent trading activity, Polycab shares have declined roughly 7 percent over the past month. The steepest market value drop occurred earlier in the month following UltraTech’s entry into the wires and cables business. Despite this, Polycab has rebounded with a 3 percent gain over the last week and a 9 percent increase so far in 2026. The stock has delivered substantial returns over the longer term, with gains of 63 percent over three years and more than 248 percent over five years.

Disclaimer: This article was written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or Investment Adviser. Neither Debaroti Adhikary nor her relatives hold financial interests in the companies mentioned at the time of publication. The opinions expressed reflect those of the respective registered analysts or brokerages and have been reproduced with proper attribution. They do not represent the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consult original research reports and make investment decisions based on their own judgment. Brokerage disclaimers apply.