Cords Cable Industries Q3 FY26: Margin Pressures Mount Despite Revenue Growth

The quarterly results present a mixed picture for Cords Cable Industries, which has been steadily expanding its revenue base whilst grappling with margin compression and elevated interest costs. The company's top-line growth trajectory remains intact, with net sales reaching an all-time high of ₹235.61 crores in Q3 FY26, yet profitability metrics reveal underlying challenges that warrant closer examination by investors.

Founded in 1991 by three professionals—Naveen Sawhney, D.K. Prashar, and Rakesh Malhotra—to provide high-quality customised cables, the company has evolved into a niche player in the electrical cables segment. However, its micro-cap status and limited institutional participation (just 2.04% institutional holdings) mean the stock remains relatively under-researched and volatile.

Financial Performance: Revenue Growth Masks Profitability Concerns

Cords Cable Industries demonstrated robust top-line momentum in Q3 FY26, with net sales climbing 4.39% sequentially to ₹235.61 crores and 14.71% year-on-year. This represents the company's highest-ever quarterly revenue, continuing a growth trajectory that has seen sales expand at a five-year compound annual growth rate of 21.01%. The quarter-on-quarter acceleration from the flat performance in Q2 FY26 suggests improving demand conditions in the electrical cables segment.

However, the profitability picture presents a more nuanced narrative. Whilst net profit surged 37.43% sequentially to ₹4.92 crores, recovering from the disappointing ₹3.58 crores in Q2 FY26, the year-on-year growth of just 5.13% lags significantly behind the revenue expansion. The PAT margin for Q3 FY26 stood at 2.09%, down from 2.28% in the corresponding quarter last year, highlighting the margin compression challenge facing the company.

Operating profit (PBDIT) excluding other income reached ₹14.63 crores in Q3 FY26, translating to an operating margin of 6.21%—a marginal improvement of 3 basis points quarter-on-quarter but down 5 basis points year-on-year. The company's operating margins have remained relatively stable in the 6.00-6.32% range over the past seven quarters, suggesting limited pricing power or efficiency gains despite scale expansion.

Interest costs remain a significant drag on profitability, though they declined to ₹6.41 crores in Q3 FY26 from ₹7.04 crores in Q2 FY26. Year-on-year, interest expense has increased 23.27% from ₹5.20 crores, reflecting both higher debt levels and elevated interest rates. The interest coverage ratio, measured by EBIT to interest, stands at a modest 1.42 times on average, indicating limited cushion for debt servicing.

Capital Efficiency: Strong ROCE Signals Operational Strength

Despite margin pressures, Cords Cable Industries demonstrates commendable capital efficiency metrics that distinguish it within the micro-cap segment. The company's return on capital employed (ROCE) for the half-year period (H1 FY26) reached an impressive 16.63%—the highest in its recent history—whilst the latest annual ROCE stands at 17.27%, significantly above the five-year average of 15.16%. This elevated ROCE indicates that management is deploying capital productively and generating healthy returns above the cost of capital.

The strong ROCE performance is particularly noteworthy given the company's modest debt levels. With an average debt-to-EBITDA ratio of 1.98 times and net debt-to-equity of just 0.40, Cords Cable maintains a conservative balance sheet that provides financial flexibility. The debtors turnover ratio for H1 FY26 reached 4.44 times—also a record high—suggesting improved working capital management and faster cash collection cycles.

The company's sales-to-capital-employed ratio of 2.29 times demonstrates reasonable asset turnover, though there remains scope for improvement. Employee costs rose to ₹12.44 crores in Q3 FY26 from ₹10.44 crores in Q2 FY26, a 19.16% sequential increase that outpaced revenue growth and warrants monitoring in future quarters.

Industry Context: Underperforming Sector Peers

The electrical cables sector has experienced mixed fortunes over the past year, with the broader Cables - Electricals segment delivering a 2.50% return. Cords Cable Industries, however, has significantly underperformed this benchmark, posting a negative 9.61% return over the same period—an underperformance of 12.11 percentage points. This divergence suggests company-specific challenges rather than sector-wide headwinds.

The stock's technical indicators paint a decidedly bearish picture. Trading at ₹172.05, the share price sits below all key moving averages—5-day (₹175.94), 20-day (₹164.71), 50-day (₹176.91), 100-day (₹179.34), and 200-day (₹184.54). The overall technical trend turned bearish on February 13, 2026, with multiple indicators including MACD, Bollinger Bands, and KST all signalling weakness on both weekly and monthly timeframes.

The stock's high beta of 1.34 indicates significantly greater volatility than the broader market, with annualised volatility of 43.51%—nearly four times the Sensex's 11.46%. This elevated risk profile, combined with negative risk-adjusted returns of -0.22 over the past year, positions Cords Cable in the unfavourable "high risk, low return" category.

Within its peer group, Cords Cable trades at the lowest P/E multiple of 13.38 times, compared to peers ranging from 18.80 to 48.57 times. The company's price-to-book ratio of 1.17 times is also amongst the lowest in the group, suggesting the market assigns limited premium to its equity base. Whilst the ROE of 5.74% lags behind Paramount Communications' 10.94%, it compares favourably to several peers with negligible or negative returns. The conservative debt-to-equity ratio of 0.40 provides a margin of safety relative to more leveraged competitors.

Valuation Analysis: Attractive Entry Point or Value Trap?

At the current price of ₹172.05, Cords Cable Industries trades at a P/E ratio of 13.38 times trailing twelve-month earnings—a significant 69% discount to the industry average P/E of 43 times. The price-to-book ratio of 1.17 times suggests the stock trades only marginally above its book value, whilst the enterprise value-to-EBITDA multiple of 5.39 times appears reasonable for a company with modest growth prospects.

The proprietary valuation assessment categorises the stock as "Very Attractive," a grade it has maintained since November 12, 2024. The enterprise value-to-capital-employed ratio of 1.12 times, combined with the strong ROCE of 17.27%, suggests the market is undervaluing the company's operational efficiency. The PEG ratio of 0.32 indicates the stock trades at a discount to its growth rate, though the five-year EBIT growth of just 10.50% raises questions about sustainability.

The stock's 52-week range of ₹148.40 to ₹222.00 shows considerable volatility, with the current price sitting 22.50% below the high and 15.94% above the low. The dividend yield of 0.58% provides minimal income support, reflecting the company's conservative payout ratio of 8.81% as management retains capital for growth investments.

However, the "Very Attractive" valuation grade must be weighed against the company's "Average" quality rating and "Bearish" technical trend. The overall proprietary score of 51 out of 100 places the stock in "HOLD" territory, suggesting the valuation discount may reflect legitimate concerns about execution, market positioning, or growth sustainability rather than presenting a compelling buying opportunity.

Shareholding Pattern: Promoter Confidence Building

The shareholding pattern reveals a gradual increase in promoter confidence, with promoter holdings rising to 52.35% in December 2025 from 51.92% in the previous three quarters. This 43-basis-point sequential increase, whilst modest, signals alignment between promoter interests and shareholder value creation. Naveen Sawhney, the founding promoter, maintains a commanding 47.22% stake, with family members Varun, Adarsh, and Gaurav Sawhney collectively holding an additional 5.13%.

Foreign institutional investor holdings increased to 1.49% from 1.29%, whilst other domestic institutional investor holdings jumped significantly to 0.55% from 0.08%—a near seven-fold increase that suggests emerging institutional interest. However, the complete absence of mutual fund and insurance company holdings (both at 0.00%) highlights the stock's limited appeal to mainstream institutional investors, likely due to its micro-cap status and liquidity constraints.

Non-institutional holdings declined 109 basis points to 45.61%, possibly reflecting retail profit-booking or portfolio rebalancing. Positively, there is no promoter pledging, eliminating concerns about financial stress or forced selling. The total institutional holding of just 2.04% leaves the stock vulnerable to volatility and limits research coverage, though it also presents opportunity for re-rating should institutional interest develop.

Stock Performance: Three-Year Outperformance Fades

Cords Cable Industries' stock performance presents a tale of two timeframes. Over longer horizons, the company has delivered exceptional returns—161.28% over three years, 174.84% over four years, and a remarkable 269.21% over five years—substantially outperforming the Sensex across these periods with alpha generation of 124.55%, 132.75%, and 208.91% respectively.

However, the near-term picture has deteriorated sharply. The stock has declined 9.61% over the past year, underperforming the Sensex by 18.13 percentage points, whilst the two-year return of -9.87% compares unfavourably to the Sensex's 15.47% gain. Year-to-date, the stock is down 7.03%, and the six-month return of -4.87% contrasts with the Sensex's positive 2.59%.

This performance divergence suggests that the exceptional gains of 2021-2023 have given way to consolidation and profit-taking. The stock's underperformance versus its sector (which returned 2.50% over one year) by 12.11 percentage points indicates company-specific challenges rather than sector-wide weakness. The bearish technical trend, with the stock trading below all major moving averages, reinforces the cautious near-term outlook.

Investment Thesis: Quality Concerns Overshadow Valuation Appeal

The investment case for Cords Cable Industries rests on four key pillars: valuation attractiveness, quality assessment, financial momentum, and technical positioning. The proprietary scoring framework assigns the stock an overall rating of 51 out of 100, placing it firmly in "HOLD" territory with the recommendation that it is "not recommended for fresh buy" though existing holders "can continue to hold."

The "Very Attractive" valuation grade reflects the significant discount to industry multiples and the low enterprise value-to-capital-employed ratio relative to ROCE. However, this is counterbalanced by an "Average" quality rating, which acknowledges the company's healthy long-term sales growth of 21.01% and strong ROCE of 15.16%, but also highlights concerns including weak interest coverage (1.42 times), modest ROE (5.74%), and relatively poor five-year EBIT growth of just 10.50%.

The financial trend turned "Positive" in Q3 FY26, supported by record quarterly revenue, highest-ever half-year ROCE of 16.63%, and improved debtors turnover. Yet the "Bearish" technical trend, confirmed by multiple indicators including MACD, Bollinger Bands, and KST, suggests the market remains sceptical about the sustainability of operational improvements.

Key Strengths & Risk Factors

Outlook: What to Watch

The forward outlook for Cords Cable Industries hinges critically on management's ability to translate revenue growth into sustainable margin expansion. The company's strong capital efficiency metrics provide a foundation, but the persistent gap between ROCE and ROE, combined with elevated interest costs and margin pressures, suggests execution challenges remain. Investors should monitor quarterly results closely for evidence of operating leverage, improved pricing realisation, or cost optimisation initiatives that could bridge the profitability gap.

The technical picture requires a decisive break above the 200-day moving average at ₹184.54 to signal a trend reversal. Until such confirmation emerges, the bearish technical setup argues for patience. The stock's high beta and volatility mean timing entry points carefully is crucial for risk management.