JM Financial bets big on cables & wires; KEI Ind, Polycab among top picks

Rising trend of energy consumption coupled with ongoing urbanisation and robust expansion of data centres and electric vehicles (EVs), the future growth trajectory of the C&W sector looks promising

Cables & Wires stocks: JM Financial is betting big on cables and wires (C&W) stocks. With heightened focus on infrastructure development and increasing investments in power transmission and distribution (T&D), the C&W sector is set to witness a compound annual growth rate (CAGR) of 12 per cent over the financial year (FY) 2025-28E, as per the brokerage firm. JM Financial has initiated coverage on two major C&W stocks, Polycab India and KEI Industries, with a double-digit upside estimated and a 'Buy' rating.

 

India's C&W industry was valued at ₹90,000 crore in FY25, despite the disruptions caused by the Covid-19 pandemic. Rising utilisation levels have prompted leading players to undertake aggressive capacity expansions, especially in the cables industry, as per the domestic brokerage firm. Besides, the China+1 sentiment has added to the overall bullish sentiment in the sector. "We expect exports to be a key growth driver for Indian C&W players. Over the last 5 years, India’s C&W exports have registered a 16 per cent CAGR, and India’s share in global C&W exports has inched up," the brokerage firm said. 

 

However, as the industry takes on an expansion mode, new players are likely to enter the market. 

New entrants a threat?

Despite the wires segment being largely unorganised, JM Financial believes that the entry of new players will have a minimal impact on established names. Given the strong growth outlook for the sector, there have been reports of industry giants like UltraTech and Adani (tentatively) exploring a prospective entry in the sector. 

 

A similar trend played out in the paint industry, where legacy brands felt the squeeze on their bottom lines when new players entered the market. However, the brokerage firm is not expecting a comparable outcome in the wires segment. "We expect new entrants to have a greater impact on smaller, unorganised industry players, as compared to industry leaders," JM Financial said.

 

"Unlike in paints, entry of new entrants is unlikely to disrupt given the lower capex and a fragmented industry set up. The Indian C&W industry comprises 400+ players, ranging from SMEs to large enterprises, and we believe that the impact upon full ramp-up will be largely on smaller players, relatively insulating the large organised pack," the brokerage firm added.

 

Meanwhile, a rising trend of energy consumption coupled with the ongoing urbanisation and robust expansion of data centres and electric vehicles (EVs), the future growth trajectory of the C&W sector looks promising. Plus, higher export opportunities are likely to act as a major growth driver for the industry. India's overall share in C&W exports has surged to 1.3 per cent from 0.9 per cent over the last 5-year period. That apart, the US' share in India's total C&W exports has increased from 9 per cent in the current year (CY) 2019 to 19.7 per cent in CY24.  

KEI Industries among top picks

JM Financials has initiated a 'buy' rating on Polycab and KEI Industries.

 

Notably, this coincides with a decline in both companies' stock performance so far this calendar year. Shares of Polycab India have fallen 7.6 per cent, while KEI Industries has recorded a steeper drop of 18.5 per cent per cent, during the period. However, the brokerage firm believes that the worst might be over for the companies with a strong distribution strategy in place and diversified revenue channels.  JM Financials has initiated coverage on KEI Industries with a 'Buy' rating alongside a target price (TP) of ₹4,500, implying an upside of 24.6 per cent from the current market price (CMP) of ₹3,612. KEI is the second largest C&W player in the market (after Polycab) and is likely to post a revenue CAGR of 19 per cent through FY25-28E. 

For Polycab India, the brokerage firm is seeing an upside of 17.8 per cent from the CMP ₹6,706, citing an expected improvement in the company's fast-moving electrical goods (FMEG) segment.

JM Financials has also re-initiated its coverage on RR Kabel with a 'Buy' rating. The brokerage firm has set the TP at ₹1,640 on the stock, implying an upside of 23.1 per cent from the CMP of ₹1,332.