Polycab India: Strong Q2 Numbers, but Margins?

Polycab India makes wires and cables, FMEG products, and provides EPC services. It holds an estimated 30-31% share of India’s organised wires and cables market. FMEG covers fans, lighting, switches and switchgear. What happened: In Q2FY27, consolidated revenue rose 53% year on year to Rs 9,898.9 crore. EBITDA grew 39% to Rs 1,422.5 crore, with a margin of 14.4%, down from 15.8% in Q2FY26. Net profit rose 43% to Rs 990 crore. Wires and cables EBIT margin was 14.2%. FMEG revenue jumped 124% to Rs 993.1 crore, with a margin of 10.1%. EPC ran at 7.2% margins. Why it matters: Polycab is building a data centre cables business. Through its institutional division, it supplies LV, MV and HV cables and is developing optical fibre cables for the segment. Private capital data centre projects currently run at 10 MW to 15 MW. An Extra High Voltage (EHV) cable manufacturing facility is scheduled for commissioning in FY28, expanding its capability in high-voltage transmission. What I am watching: Management’s long-term EBITDA guidance is 11-13%, below the current 14.4%. FMEG targets margins of 8-10% by FY30. Exports were 5% of revenue. The US market is served through institutional representatives supplying data centre operators. The stock trades at 37 times trailing earnings, below its three-year median of 47.8 times. ROCE is 33.2% and ROE is 23%. My stance: The business is executing well. Q2 numbers are strong across all three business segments. But current margins are above guidance, and the data centre opportunity is still in early stages. At 37 times earnings, the valuation is more reasonable than recent history, but margin normalisation is coming. I do not hold a position in Polycab India at the time of writing. This is not investment advice.