Polycab India is once again in the spotlight as global brokerage firm Jefferies has upgraded the stock with a bullish stance. Jefferies has placed a ‘Buy’ rating on Polycab with a target price of Rs 7,150. The stock responded positively to this development, climbing 5% and trading around Rs 6,300 on Monday, 23rd June. However, despite this recovery, the stock remains approximately 17% below its all-time high.
One of the key drivers behind Jefferies’ optimistic view is the turnaround in Polycab's FMEG (Fast Moving Electrical Goods) segment. The FMEG segment, which contributes about 10% of the company’s total sales, has finally turned profitable after ten consecutive quarters of losses. This development signals improved operational efficiency and better margins in this category, adding to investor confidence.
Jefferies further highlighted important details disclosed in Polycab’s FY25 Annual Report, particularly Project ‘Spring’ and the company’s ambitious targets for FY30. The brokerage estimates a strong earnings growth trajectory, projecting an EPS CAGR (Compound Annual Growth Rate) of 26% for the period FY25-28. This expected growth is underpinned by a robust order book, supported by large government initiatives such as the Revamped Distribution Sector Scheme (RDSS) and Bharat Net, along with improving profitability in the FMEG segment.
However, Polycab’s journey over the past few months has been far from smooth. The stock has faced significant pressure due to increasing competition in the wires and cables sector. The entry of major players has raised concerns over market share and pricing power.
Earlier, Ultratech Cement announced a substantial investment of Rs 1,800 crore to foray into the wire and cable business. On the day of this announcement, Polycab’s shares experienced a sharp fall of more than 18% in intraday trading. The market reacted strongly to the threat posed by a new large-scale competitor entering the sector.
Adding to the competitive pressure, the Adani Group later declared its own plans to enter the wires and cables segment. The news triggered another round of heavy selling, leading to a 10% lower circuit in Polycab’s stock on that particular day. These developments have kept the stock under sustained selling pressure over the past few months.
Despite these setbacks, the recent upgrade by Jefferies reflects renewed optimism about Polycab's ability to navigate the challenges and sustain its leadership in the sector. The strong government-backed infrastructure pipeline, combined with Polycab’s ongoing internal improvement projects like Project Spring, suggests that the company is well-positioned to achieve its long-term growth objectives.
While competition remains a risk factor, Polycab’s management seems confident in its diversified product portfolio, established brand value, and wide distribution network to maintain its market standing. Investors will be closely watching the upcoming quarters to assess whether the company can continue to deliver strong earnings growth while defending its market share against the newly emerging competitors.
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