In a comprehensive report on cable and wire stocks, brokerage firm UBS has initiated coverage on Polycab and KEI Industries, recommending a “buy” rating for both companies.
UBS highlights these stocks as the best plays on India’s electrification theme, underscoring the robust growth potential in this sector.
What are Price Targets and Expected Potential Upside?
UBS has set a price target of Rs 6,150 for KEI Industries, implying a potential upside of 41% from Monday’s closing price. For Polycab, the brokerage has ascribed a price target of Rs 8,550, indicating a potential upside of 28% from Monday’s close. Year-to-date, shares of Polycab have risen 22%, while KEI Industries has seen a 36% increase in 2024.
Sector Growth and Market Outlook
According to UBS, the cables and wire segment is poised for significant growth, expected to double the country’s GDP growth rate between FY24 and FY30. UBS projects the current $8 billion market to expand to $20 billion by FY30, with the top five companies increasing their market share during this period.
Revenue and EBITDA Growth Projections
UBS forecasts that the revenue and Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) for the cable and wire segment covered by UBS will grow at a Compounded Annual Growth Rate (CAGR) of 20% and 25%, respectively, between FY24 and FY28. This growth is expected to be driven by robust demand, operating leverage, increased market share, and export penetration.
KEI Industries: Pure Play on Cables & Wires
UBS identifies KEI Industries as the only pure play in the cables and wires business, offering multiple growth triggers. These include sustained growth in cables and wires, potential market share gains in branded housing wires and cables, an export ramp-up, and the optionality to enter adjacent electrical segments. UBS projects KEI’s revenue and EBITDA CAGR to grow at 22% and 31%, respectively, between FY25 and FY27.
Polycab: Cyclical Growth Champion
UBS has dubbed Polycab a “cyclical growth champion” and a key beneficiary of long-term electrification growth. The report highlights Polycab Is significant room for revenue growth within its Total Addressable Market (TAM), with the Fast-Moving Electrical Goods (FMEG) segment playing a crucial role. Key near-term triggers for Polycab include better-than-expected domestic volume growth, domestic market share gains, and an export ramp-up.