SYNOPSIS: JPMorgan initiated overweight coverage on two cable stocks, citing strong cable sector tailwinds and earnings upside, while cautioning on rising competition and potential margin normalisation amid new entrants.
India’s cables and wires industry has delivered strong growth, expanding at a CAGR of around 11 percent over the past five years to reach an estimated Rs. 90,000 crore market size in FY25. Growth picked up further to nearly 13 percent during FY23-FY25, supported by rising demand from real estate, renewable energy, infrastructure development, and industrial capex.
According to Motilal Oswal, this momentum is likely to continue. The brokerage expects the sector to grow at a 13-14 percent CAGR between FY25 and FY30, which would double the market size to around Rs. 1.9 trillion by FY30. Over the near to medium term, the industry is projected to expand at 1.5-2 times India’s real GDP growth, reflecting its structural demand drivers.
India has also emerged as a net exporter of cables and wires since FY20, with exports climbing from Rs. 8,300 crore in FY20 to Rs. 19,800 crore in FY25, translating into a robust 19 percent CAGR. Cables typically account for 5-10 percent of total project capex, and every 1 MW of new data centre capacity can generate around Rs. 3.5 crore of incremental cable demand. These trends point to a long runway for growth, especially for manufacturers focused on premium and institutional-grade cabling, the brokerage noted.
Adding to this momentum of strong industry tailwinds, JPMorgan has initiated coverage on Polycab and KEI Industries. The brokerage views both cable-and-wire majors as offering “picks and shovels” exposure to structural themes such as electrification and the energy transition.
JPMorgan expects near-term earnings upside for both companies, supported by rising global copper prices, which tend to benefit inventory-led players. Its FY27 EPS estimates for Polycab and KEI Industries are 8-12 percent higher than current consensus forecasts, indicating scope for positive earnings revisions.
That said, the brokerage flagged a potential risk from the entry of large conglomerates, particularly in the wires segment, which is a high-margin and largely organised space. Increased competition could pressure industry margins and return on capital employed (RoCE) over time. However, JPMorgan believes that Polycab and KEI Industries are relatively better positioned than their peers.
With a market cap of Rs. 1.13 lakh crores, the stock tumbled to hit an intraday low at Rs. 7,526 on BSE, down by around 1.3 percent on Tuesday. The global brokerage has initiated coverage on Polycab with an “overweight” rating and a target price of Rs. 8,900 per share, implying a potential upside of around 17 percent from its previous close.
According to JPMorgan, Polycab is expected to outperform peers in the near term. However, the brokerage cautioned that the company’s margin superiority may face pressure as competitive intensity increases.
The report noted that Polycab’s EBIT margins, around 450 bps higher than those of the top five peers, could gradually normalise. This is attributed to new entrants targeting the organised wires segment and Polycab’s own fresh capex cycle, which may be required to defend and grow its market share in cables.
With a market cap of Rs. 41,198 crores, the stock hit an intraday low at Rs. 4,282.25 on BSE, down by around 2 percent on Tuesday. JPMorgan has initiated coverage on KEI Industries with an “overweight” rating and a target price of Rs. 5,250 per share, implying a potential upside of more than 20 percent from its previous close.
In March last year, the Adani Group announced its entry into the cables and wires space after the wholly owned subsidiary of Adani Enterprises, Kutch Copper Limited, incorporated a JV, Praneetha Ecocables Ltd., with a 50 percent stake. Shortly after, in February, UltraTech Cement, the flagship company of the Aditya Birla Group, revealed plans to enter the wires and cables segment with a Rs. 1,800 crore capex spread over two years.
Addressing competitive concerns, Anil Gupta, Chairman and MD of KEI Industries, had stated in an interview that the cables and wires market is large enough to absorb new entrants, adding that UltraTech’s foray would take several years to scale, with no immediate threat to margins or business prospects.
According to JPMorgan, KEI is better positioned than most peers due to its higher exposure to cables, which contribute around 65-70 percent of revenues. The brokerage highlighted KEI’s cleaner play on cables and wires, stronger export footprint, and higher exposure to Extra High Voltage (EHV) products. It also expects margin expansion as newly commissioned capacities ramp up over the next few quarters, with projections of 20-25 percent earnings growth over the next three years, driven by volume growth and operating leverage.
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