Aditya Roy/AI-Generated Image
Summary: Something unusual is happening in the market right now. One corner of the economy has been improving on every important metric, without drawing attention. Growth is steady, profitability is firm, and reinvestment is accelerating in a way we don’t often see. The numbers point to a much bigger story hiding in plain sight, but the real question is what investors should do next.
We were going through sector-wide numbers recently, and one industry kept showing up in all the right places. Growth looked steady. Profitability stayed firm. Reinvestment was rising, not shrinking. Most sectors usually excel in one or two metrics and slip on the third. Electricals didn’t.
It was the only sector that looked balanced, almost suspiciously well-balanced.
Over the last five years, the sector hasn’t delivered blistering growth, but it has delivered reliable growth. Sales have climbed at a steady pace, profitability has improved, and efficiency hasn’t just held up, it’s strengthened. Three-year incremental ROCE sitting at 33 per cent tells you that the returns on new capital are actually better than the returns on legacy capital. That rarely happens in a mature industrial segment.
And yet, this hasn’t been a headline sector. There’s been no big policy wave, no hype cycle, no sudden rerating fuelled by a fashionable narrative. The progress has been quiet, broad and surprisingly consistent.
What fuelled the last five years
If you dissect the last five years, the reason Electricals held up so well becomes obvious: demand came from everywhere, not just one place.
- Housing stayed stable, not euphoric, but solid enough to keep the wires and low-voltage cable market ticking.
- Infrastructure didn’t slow, and every metro network, utility upgrade and city project needs large quantities of cabling.
- Renewables expanded, pulling in higher-spec, higher-margin cables across solar, wind and grid upgrades.
- Digitisation accelerated, and data centres, fibre rollout and cloud infrastructure created pockets of strong, recurring demand.
- Factories modernised, pushing up the need for electrical components, control systems and industrial wiring.
- EV charging hubs multiplied, a small but rising source of heavy-duty cable demand.
Nothing was explosive, but everything was steady. That’s what gave the sector its durability. And that’s why profitability didn’t crack. As demand moved away from commodity cables towards speciality, instrumentation, and high-voltage categories, margins improved without any dramatic cost-cutting. Component makers also benefited from rising electronic content in appliances, vehicles and industrial systems.
This mix-shift explains why incremental returns look so healthy—the industry simply moved into better products.
Why the next phase may be stronger than the last
Here’s where it gets more interesting: companies are no longer just riding steady demand—they’re leaning in.
Capex tells the story. FY25 capex as a share of revenue is 6.4 per cent, and when you look at the cumulative picture—6.3 per cent over two years and 5.5 per cent over three—you realise this isn’t a maintenance cycle. It’s a full-fledged buildout. And the buildout is targeted.
- Renewables and grid upgrades need cables that are more durable and technically complex.
- Data-centre infrastructure is becoming a major long-term demand pocket.
- Telecom modernisation requires high-quality fibre, connectors and network cabling.
- Formalisation is accelerating, favouring tested, certified, organised players.
- Localisation is giving electronics components a long runway.
- Export readiness is rising as firms upgrade testing labs and certification capability.
The sector is shifting from commodity-heavy to capability-led. From price-driven to quality-driven. From fragmented to formalised. When sectors move like this, they don’t just grow—they become harder to disrupt.
But let’s address the obvious: Valuations
As always, the market is not blind. If a sector has grown steadily, kept profitability intact and is now deploying serious capex into high-return opportunities, investors notice.
Valuations across many electrical names have already moved up. In some cases, they now reflect priced-to-perfection expectations: strong revenue growth, improving mix, stable margins and a consistent capex cycle.
That leaves less room for disappointment. Copper and aluminium prices are still volatile. Working capital can expand if the infrastructure clients delay payments. A few contracts slipping or a large project getting pushed out could compress margins temporarily. In a normal valuation environment, these would be shrugged off. At elevated valuations, the reactions can be sharper. So yes, the fundamentals look good. But the easy, valuation-led rerating phase might be largely over.
What should investors do?
The opportunity in Electricals isn’t about timing the next quarter—it’s about recognising that the sector is getting fundamentally better. Better products, better margins, better reinvestment. The only problem is that valuations already reflect this progress. So the smarter approach is simple: don’t chase, don’t ignore. Keep the sector in your line of sight, wait for the inevitable market-wide shakeouts, and use those moments to pick the stronger names. When a sector upgrades itself quietly, it usually pays off for the investors who were patient enough to wait for the right entry.
If you want help identifying which companies truly deserve a spot on your watchlist—and which ones merit action when opportunities open up—Value Research Stock Advisor can guide you with clear, long-term focused stock recommendations backed by fundamental research.
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