Shares of prominent Indian cable and wire manufacturers RR Kabel Ltd, KEI Industries Ltd, and Polycab India Ltd experienced significant declines in Wednesday's trading session. This downturn followed JM Financial's decision to downgrade its ratings on the three stocks, citing a cautious outlook for the cables and wires (C&W) industry's growth.
Brokerage Cites Growth Concerns and New Competition
JM Financial expressed several key concerns impacting the sector. The brokerage highlighted a potential absence of volume growth after a period of strong performance and noted that elevated copper prices from late Q3 FY27/Q4 FY27 could lead to weaker revenue growth over the subsequent 12 months. Furthermore, the entry of new competitors is expected to intensify market pressure.
Specifically, JM Financial revised its ratings for Polycab India and KEI Industries from 'Buy' to 'Add', while RR Kabel was downgraded from 'Add' to 'Reduce'. The brokerage also set new 12-month target prices: Rs 9,550 for Polycab, Rs 5,750 for KEI Industries, and Rs 2,750 for RR Kabel.
On Wednesday, RR Kabel shares slumped 7.29 per cent to Rs 2,658.80, KEI Industries declined 3.02 per cent to Rs 5,174, and Polycab India shares fell 2.08 per cent to Rs 8,732.
Impact of New Entrants on Market Share
The report underscores the anticipated impact of new players like Ultratech and Diamond Power, which are projected to cumulatively generate around Rs 17,000 crore in revenue by FY29. This could translate into an estimated 11-12 per cent market share, significantly altering the competitive landscape. Additional competition from established brands such as Crompton and Bajaj is also expected to factor into industry dynamics.
JM Financial estimates the Indian C&W industry could reach Rs 1.52 lakh crore by FY29, implying a 15 per cent Compound Annual Growth Rate (CAGR). However, adjusting for new competition, the addressable domestic opportunity might shrink to Rs 1.35 lakh crore, resulting in a lower FY26-FY29 CAGR of 10.5 per cent domestically, or approximately 12-13 per cent including exports.
Valuations Under Scrutiny
The brokerage also called for a closer examination of valuations within the sector. It noted that select C&W stocks are currently trading at a 4-5 per cent premium to their five-year average and roughly a 25 per cent premium to their long-term average Price-to-Earnings (P/E) multiples. With growth potentially tapering and margins possibly peaking, JM Financial identifies Polycab as the most susceptible among the three downgraded stocks, followed by RR Kabel and then KEI Industries.
Disclaimer: This article provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.