Shares of Polycab India fell over 5% on October 18, even though the company reported solid earnings for the second quarter of FY25.
The electrical goods company posted a 3.6% year-on-year (YoY) rise in net profit to ₹445.2 crore, with total income growing to ₹5,574.6 crore, up from ₹4,253 crore in the same period last year.
Despite achieving its highest-ever Q2 sales, driven by 28% domestic growth in its cables and wires (C&W) segment, Polycab’s shares dropped due to margin concerns.
At the time of writing, Polycab’s shares were trading 3% lower at ₹6,910.35 on the National Stock Exchange (NSE).
Robust sales, but margins face pressure
Polycab’s performance was driven primarily by its core business—wires and cables—which saw growth outpacing other segments.
However, analysts pointed out that operating profit margins were hit by increased competition and changes in the product mix.
The company also reported an 18% growth in its Fast-Moving Electrical Goods (FMEG) segment, though the segment continues to operate at a loss.
Jefferies issued a ‘buy’ rating with a target price of ₹8,315 per share, acknowledging the strong Q2 performance but noting the margin pressures as a key challenge.
Nuvama also retained its ‘buy’ call, setting a target price of ₹8,340, citing the company’s growth potential both in domestic and international markets.
Export strategy driving long-term growth
Polycab has also been expanding its footprint beyond India, with exports now accounting for 10% of C&W revenue.
Analysts believe this shift toward international markets offers higher-margin growth opportunities.
Nuvama highlighted Polycab’s shift from order-led exports to a distribution-led model, which could position the company for sustained growth in global markets.
“Once demand turns around, the revenue upturn in FMEG could lead to sharper margin improvements than the market currently expects,” Nuvama stated.
Polycab’s stock outperformance and future outlook
Despite today’s decline, Polycab shares have risen by 24% this year, outperforming the Nifty’s 15% gain.
Over the past 12 months, Polycab’s stock has increased 30%, compared to the Nifty’s 25% rise during the same period.
The company remains India’s largest manufacturer of wires and cables and is one of the fastest-growing players in the FMEG sector.
With 23 manufacturing facilities, over 15 offices, and more than 25 warehouses across India, Polycab is well-positioned for future growth.
Brokerages remain optimistic about the company’s ability to maintain its growth momentum, with a particular focus on its expanding export business and potential margin recovery in the FMEG segment.
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