Polycab India Ltd Valuation Shifts Signal Heightened Price Attractiveness Amid Sector Dynamics

Valuation Metrics Reflect Elevated Price Levels

As of 4 February 2026, Polycab India’s stock price closed at ₹7,484, marking a 6.40% increase from the previous close of ₹7,033.95. The stock has traded within a 52-week range of ₹4,557.45 to ₹7,947.35, underscoring a strong upward trajectory over the past year. This price momentum has pushed key valuation multiples to elevated levels. The price-to-earnings (P/E) ratio stands at 42.91, a figure that places the stock firmly in the 'very expensive' category compared to its historical averages and industry peers.

Similarly, the price-to-book value (P/BV) ratio is at 10.64, signalling a substantial premium over the book value of the company’s equity. Enterprise value to EBITDA (EV/EBITDA) is recorded at 28.45, while the EV to EBIT multiple is 31.44, both indicating a stretched valuation relative to earnings before interest, taxes, depreciation, and amortisation. These multiples are notably higher than those of KEI Industries, a key peer in the cables sector, which trades at a P/E of 48.87 and EV/EBITDA of 35.47 but is still rated as 'Expensive' rather than 'Very Expensive'.

Operational Excellence Supports Premium Valuation

Polycab India’s elevated valuation is underpinned by strong operational performance. The company boasts a return on capital employed (ROCE) of 40.92% and a return on equity (ROE) of 23.24%, both indicative of efficient capital utilisation and profitability. These metrics justify, to some extent, the premium multiples as investors are willing to pay more for quality earnings and sustainable growth.

Moreover, the company’s PEG ratio, which adjusts the P/E ratio for earnings growth, is at 1.01, suggesting that the stock’s price is broadly in line with its growth prospects. Dividend yield remains modest at 0.47%, reflecting the company’s focus on reinvestment and expansion rather than income distribution.

Market Performance Outpaces Benchmarks

Polycab India’s stock has delivered impressive returns over multiple time horizons, significantly outperforming the Sensex benchmark. Over the past one year, the stock has appreciated by 28.31%, compared to the Sensex’s 8.49%. The three-year return is even more striking at 153.79%, dwarfing the Sensex’s 37.63% gain. Over five years, the stock has surged by 477.74%, a remarkable performance that highlights its strong growth trajectory and market leadership in the cables electricals sector.

Shorter-term returns show some volatility, with a one-month decline of 4.01% versus a 2.36% drop in the Sensex, and a year-to-date return of -1.88% compared to -1.74% for the benchmark. However, the one-week return of 10.6% significantly outpaces the Sensex’s 2.30%, indicating renewed buying interest and positive sentiment.

Upgrade to Buy Reflects Confidence in Growth and Quality

Reflecting these strong fundamentals and market performance, MarketsMOJO upgraded Polycab India’s Mojo Grade from 'Hold' to 'Buy' on 21 July 2025. The current Mojo Score stands at 71.0, signalling a favourable outlook. The market capitalisation grade remains at 2, indicating a mid-cap status with considerable growth potential.

This upgrade is significant as it recognises the company’s ability to sustain growth and profitability despite the stretched valuation. Investors are advised to weigh the premium multiples against the company’s operational excellence and market leadership in the cables electricals sector.

Peer Comparison Highlights Relative Valuation

When compared with KEI Industries, another prominent player in the cables sector, Polycab India’s valuation appears relatively attractive despite being labelled 'very expensive'. KEI Industries trades at a higher P/E of 48.87 and EV/EBITDA of 35.47, with a PEG ratio of 1.41, indicating a higher premium relative to growth. This comparison suggests that Polycab India’s valuation, while elevated, is not excessive within the context of its peer group.

Investors should also consider the company’s superior ROCE and ROE metrics, which support the premium valuation and justify a Buy rating in the current market environment.

Risks and Considerations

Despite the positive outlook, the very expensive valuation metrics imply limited margin for error. Any slowdown in earnings growth or adverse macroeconomic developments could lead to valuation compression. The modest dividend yield also means investors are relying primarily on capital appreciation for returns.

Furthermore, the cables electricals sector is subject to raw material price volatility and competitive pressures, which could impact margins. Investors should monitor quarterly earnings closely to assess whether the company can maintain its operational momentum.

Conclusion: Premium Valuation Backed by Strong Fundamentals

Polycab India Ltd’s transition to a very expensive valuation band reflects the market’s recognition of its robust earnings growth, operational efficiency, and sector leadership. While the elevated P/E and P/BV ratios suggest a high price point, the company’s superior returns on capital and consistent market outperformance provide a solid foundation for this premium.

Investors should remain cognisant of the risks associated with stretched valuations but can take comfort from the recent upgrade to a Buy rating and the company’s demonstrated ability to deliver sustained growth. Polycab India remains a compelling proposition within the cables electricals sector for those seeking quality mid-cap exposure with strong growth credentials.

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