Dynamic Cables Q2 FY26: Robust Growth Momentum Continues with 41.8% Profit Surge

The stock traded at ₹415.65 on October 29, 2025, up 0.43% from the previous close, reflecting cautious optimism following the results announcement. Shares have delivered remarkable long-term returns of 364.02% over three years and an exceptional 2,928.42% over five years, though year-to-date performance has been subdued with a decline of 13.68%.

The quarter's performance underscores the company's ability to scale profitably whilst maintaining operational discipline. Revenue growth of 20.25% year-on-year to ₹281.56 crores was complemented by margin expansion across key profitability metrics, signalling improved operational efficiency and favourable input cost dynamics.

Financial Performance: Margin Expansion Drives Profitability

Dynamic Cables' second quarter results reveal a company firing on multiple cylinders. Net sales for Q2 FY26 stood at ₹281.56 crores, marking a healthy 20.25% increase from ₹234.15 crores in the corresponding quarter last year. Sequential growth of 7.45% from Q1 FY26's ₹262.04 crores demonstrates sustained momentum despite the traditionally challenging monsoon quarter.

The standout feature of this quarter was the impressive margin performance. Operating profit (excluding other income) reached ₹30.82 crores, translating to an operating margin of 10.95%—the highest in the past seven quarters. This represents a substantial improvement of 81 basis points year-on-year from 10.14% in Q2 FY25. Gross profit margin also expanded to 10.35% from 8.97% a year ago, reflecting better product mix and improved raw material cost management.

Net profit margin improved to 6.98% from 5.92% in Q2 FY25, driven by operating leverage and controlled interest costs. Interest expense declined sharply to ₹2.86 crores from ₹4.53 crores a year ago, reflecting the company's deleveraging efforts. The debt-to-EBITDA ratio stood at a comfortable 0.70 times, indicating strong debt servicing capability. Profit before tax surged 43.58% year-on-year to ₹26.33 crores, whilst the effective tax rate remained stable at 25.45%.

On a half-yearly basis (H1 FY26), the company reported net sales of ₹543.60 crores, up 22.90% from H1 FY25's ₹442.70 crores. Net profit for the first half stood at ₹37.85 crores, representing a 48.62% surge from ₹25.45 crores in the corresponding period last year. This consistent performance across quarters underscores the company's ability to capitalise on improving demand conditions in the electrical cables segment.

Operational Excellence: Return Ratios Reflect Capital Efficiency

Dynamic Cables' operational metrics paint a picture of a company that has significantly enhanced its capital efficiency over recent years. The company's return on equity (ROE) stood at an impressive 20.65% for the latest period, substantially higher than the industry average and indicative of superior shareholder value creation. This places Dynamic Cables amongst the better-performing entities in the cables and electricals space, demonstrating effective deployment of shareholders' capital.

Return on capital employed (ROCE) at 26.48% further validates the company's operational prowess. This metric, which measures how efficiently a company generates profits from its capital base, has shown consistent improvement from 21.33% on an average basis. The five-year sales compound annual growth rate (CAGR) of 24.07% and EBIT growth of 30.51% underscore the company's ability to scale profitably whilst maintaining disciplined capital allocation.

The company's balance sheet strength is evident in its shareholder funds, which more than doubled to ₹373.89 crores in FY25 from ₹117.17 crores in FY21. Fixed assets increased to ₹83.58 crores from ₹62.66 crores, reflecting ongoing capacity expansion initiatives. Current assets stood at ₹493.27 crores, providing adequate working capital cushion for operations. The company's ability to generate operating cash flow of ₹56.00 crores in FY25, despite working capital absorption of ₹30.00 crores, demonstrates robust cash generation capability.

Sales-to-capital employed ratio of 2.17 times indicates efficient asset utilisation, whilst the EBIT-to-interest coverage ratio of 4.63 times provides comfortable debt servicing headroom. The company's quality grade of "Average" reflects its strong long-term financial performance, with consistent improvement in profitability metrics and zero promoter pledging adding to investor confidence.

Industry Context: Navigating a Competitive Landscape

The Indian cables and electricals industry is experiencing robust growth driven by expanding infrastructure development, rising power demand, and the government's push towards renewable energy and electrification. The sector benefits from structural tailwinds including urbanisation, industrial expansion, and the ongoing transition to electric vehicles. However, the industry also faces headwinds from volatile raw material prices—particularly copper and aluminium—and intense competition from established players.

Dynamic Cables operates in a highly competitive market dominated by larger players such as Polycab India and KEI Industries. The company's ability to deliver consistent double-digit revenue growth and margin expansion in this environment speaks to its competitive positioning. The cables sector has faced margin pressures in recent quarters due to commodity price fluctuations, making Dynamic Cables' margin improvement particularly noteworthy.

The sector's outlook remains positive, supported by government infrastructure spending under schemes such as the National Infrastructure Pipeline and increased private sector capital expenditure. The shift towards organised players due to quality concerns and regulatory compliance requirements favours established manufacturers like Dynamic Cables. However, the company must navigate challenges including working capital management, as evidenced by the ₹30.00 crore working capital absorption in FY25, and maintain its competitive edge through product innovation and operational efficiency.

Peer Comparison: Attractive Valuation with Superior Returns

When benchmarked against industry peers, Dynamic Cables presents an interesting valuation proposition. The company trades at a price-to-earnings ratio of 25.97 times, significantly lower than larger peers Polycab India (45.88x), KEI Industries (49.15x), and R R Kabel (47.12x). This valuation discount exists despite Dynamic Cables delivering a superior ROE of 18.35%, which exceeds the peer group average of approximately 13%.

The company's price-to-book value of 5.36 times sits in the middle of the peer range, higher than Finolex Cables (2.19x) and Universal Cables (1.38x) but substantially lower than Polycab India's premium valuation of 11.50x. This suggests the market recognises Dynamic Cables' quality but has not yet accorded it the same premium as the sector leader. The company's debt-free status (net debt-to-equity of -0.05) compares favourably with peers, all of whom operate with minimal leverage.

However, Dynamic Cables' dividend yield of 0.06% lags the peer group, with Finolex Cables offering 1.02% and Universal Cables 0.57%. The modest dividend payout ratio of 2.91% suggests management is prioritising capital retention for growth investments over shareholder distributions. Given the company's strong cash generation and minimal debt, there exists scope for enhanced shareholder returns through increased dividends or buybacks in future periods.

The company's market capitalisation of ₹2,014.18 crores positions it as a small-cap player in an industry dominated by mid and large-cap companies. This size differential explains part of the valuation discount, as larger peers benefit from greater liquidity, analyst coverage, and institutional participation. Nonetheless, Dynamic Cables' operational performance suggests the valuation gap may narrow as the company scales and attracts broader investor attention.

Valuation Analysis: Attractive Entry Point for Patient Investors

At the current price of ₹415.65, Dynamic Cables trades at a P/E ratio of 26 times trailing twelve-month earnings, representing a 42% discount to the industry average P/E of 45 times. This valuation appears reasonable given the company's growth trajectory, with five-year sales CAGR of 24.07% and EBIT growth of 30.51%. The PEG ratio of 0.40 suggests the stock is trading below its growth rate, typically considered attractive for growth-oriented investors.

The stock's EV/EBITDA multiple of 16.92 times and EV/EBIT of 18.70 times are in line with historical averages for profitable, growing small-cap industrial companies. The company's enterprise value-to-sales ratio of 1.77 times reflects the market's recognition of Dynamic Cables' consistent profitability and margin expansion. Book value per share stands at ₹154.31, resulting in a price-to-book multiple of 5.36 times, which appears justified by the company's ROE of 20.65%.

The stock has corrected 23.93% from its 52-week high of ₹546.43, presenting a potential entry opportunity for long-term investors. However, it remains 80.36% above its 52-week low of ₹230.45, indicating substantial appreciation over the past year. The valuation grade of "Attractive" assigned by proprietary analysis models suggests the current price offers reasonable value relative to fundamentals, though not at distressed levels.

Fair value estimation based on peer multiples and growth prospects suggests a range of ₹450-500 per share, implying 8-20% upside from current levels. This estimate assumes the company maintains its current growth trajectory and margin profile whilst gradually closing the valuation gap with larger peers as it scales. The modest dividend yield limits income appeal, making this primarily a capital appreciation story for growth-focused portfolios.

Shareholding Pattern: Stable Promoter Base with Minimal Institutional Interest

Dynamic Cables' shareholding structure reflects a promoter-driven company with limited institutional participation. Promoter holding stood at 68.18% as of July 2025, unchanged from the previous quarter, indicating strong management confidence and alignment with minority shareholders. The promoter group, led by Ashish Mangal (31.81%) and Rahul Mangal (21.85%), has maintained consistent ownership without any pledging of shares—a positive indicator of financial stability.

Foreign institutional investor (FII) holding has shown gradual increase, rising to 1.49% in July 2025 from 1.07% in March 2025. This incremental interest from 13 FII entities suggests growing recognition of the company's fundamentals amongst global investors. However, the absence of mutual fund holdings and insurance company participation indicates the stock remains largely off the radar of domestic institutional investors, likely due to its small-cap status and limited liquidity.

Other domestic institutional investors (DII) hold 1.64% of equity, marginally up from previous quarters. The non-institutional shareholding of 28.68% comprises retail and high-net-worth investors who have been gradually accumulating shares. The sequential decline of 0.25% in non-institutional holding in the latest quarter may reflect profit-booking after the stock's strong multi-year run.

The low institutional holding of 3.14% presents both risk and opportunity. On one hand, limited institutional coverage means reduced research visibility and potential liquidity constraints. On the other hand, it suggests substantial scope for re-rating if the company continues delivering strong results and attracts institutional attention. As Dynamic Cables scales and potentially graduates to mid-cap status, institutional participation could increase meaningfully, providing a catalyst for valuation expansion.

Stock Performance: Long-Term Wealth Creator Despite Recent Consolidation

Dynamic Cables has been an exceptional wealth creator over the long term, though recent performance has been more subdued. The stock has delivered stratospheric returns of 2,928.42% over five years and 1,224.78% over four years, vastly outperforming the Sensex's returns of 113.08% and 42.82% respectively over the same periods. This translates to a staggering alpha of 2,815.34 percentage points over five years, placing it amongst the top performers in the small-cap universe.

However, shorter-term performance has been lacklustre. Year-to-date, the stock has declined 13.68% versus the Sensex's gain of 8.40%, resulting in negative alpha of 22.08 percentage points. One-year returns stand at a modest 1.95%, underperforming the Sensex by 3.44 percentage points. This consolidation phase follows the stock's extraordinary run-up, with shares trading 23.93% below the 52-week high of ₹546.43 reached earlier in the year.

The stock's six-month performance of 53.52% return demonstrates renewed momentum, outperforming the Sensex by 48.03 percentage points. Recent weeks have shown positive price action, with one-week returns of 3.01% and one-month returns of 5.51%. The stock trades above its 200-day moving average of ₹389.94 but below shorter-term averages, indicating a sideways technical trend with no clear directional bias.

With a high beta of 1.35, Dynamic Cables exhibits greater volatility than the broader market, reflected in its 60.09% annual volatility compared to the Sensex's 12.49%. This high-risk, medium-return profile makes it suitable primarily for risk-tolerant investors with long investment horizons. The stock's risk-adjusted return (Sharpe ratio) of 0.03 over one year pales in comparison to the Sensex's 0.43, indicating that recent returns have not adequately compensated for the elevated risk undertaken.

Investment Thesis: Growth Story with Execution Credentials

Dynamic Cables' investment case rests on several compelling pillars. The company has demonstrated consistent execution capability, scaling revenues from ₹342 crores in FY21 to ₹1,025 crores in FY25—a remarkable three-fold increase in just four years. This growth has been accompanied by margin expansion, with PAT margins improving from 2.6% in FY21 to 6.2% in FY25, reflecting operating leverage and improved cost management.

The company's balance sheet strength provides a solid foundation for future growth. With virtually zero net debt and strong cash generation, Dynamic Cables possesses the financial flexibility to invest in capacity expansion, working capital, and potential acquisitions without straining its capital structure. The debt-to-EBITDA ratio of 0.70 times and interest coverage of 4.63 times provide comfortable cushions.

Sector tailwinds from infrastructure development, industrial expansion, and electrification initiatives support the growth outlook. The company's focus on operational efficiency, evidenced by improving ROCE and ROE metrics, suggests management's ability to translate top-line growth into shareholder value. The absence of promoter pledging and stable shareholding pattern indicate long-term commitment from the founding family.

However, investors must weigh these positives against certain concerns. The company's small scale relative to industry leaders creates competitive challenges and limits pricing power. Working capital intensity, as evidenced by the ₹30 crore absorption in FY25, could constrain cash generation if not managed carefully. The high debt-to-equity ratio of 1.76 times on a half-yearly basis, whilst down from historical levels, requires monitoring. Limited institutional coverage and low free float create liquidity risks for larger investors.

Outlook: What to Watch in Coming Quarters

The outlook for Dynamic Cables hinges on several key factors. Sustained revenue growth whilst maintaining or improving current margin levels will be critical to validating the investment thesis. The company's ability to manage working capital efficiently, particularly given the ₹30 crore absorption in FY25, deserves close monitoring. Any deterioration in working capital metrics could signal strain on cash generation despite reported profitability.

Infrastructure spending trends, both from government and private sector, will significantly influence demand for cables and electricals. The company's ability to secure orders from large projects whilst maintaining profitability will determine whether it can sustain its growth momentum. Commodity price trends, particularly for copper and aluminium, represent a key variable that could impact margins either positively or negatively in coming quarters.

From a valuation perspective, any meaningful increase in institutional holding could serve as a catalyst for re-rating. The current 3.14% institutional ownership suggests substantial scope for increased participation if the company continues delivering results and gains broader market visibility. Conversely, failure to attract institutional interest despite strong fundamentals could keep the valuation discount intact for an extended period.