JM Financial also expects the share of organised players to inch up, driven predominantly by increasing competitive intensity, large capex requirements and increasing regulatory approvals, among other factors.
Also, unlike paints, JM Financial believes new entrants in the sector are unlikely to disrupt, given lower capex and a fragmented set up. It expects new entrants to have a greater impact on smaller, unorganised industry players, as compared to industry leaders.
Polycab India
JM Financial initiated coverage with a “buy” rating on Polycab India with a price target of ₹7,900 per share, implying a potential upside of 17.8% from its previous closing price of ₹6,705.5 apiece.
Despite Polycab’s growth being lower than peers like KEI, it should continue to command a valuation premium, given the market leadership, superior margins, higher average Return on Equity (RoE) and Return on Capital Employed (RoCE) over financial year 2025-2028 along with a better cash generation profile, the JM Financial note said.
Industries are located in Industries
JM Financial also ascribed a “buy” rating on KEI Industries with a price target of ₹4,500 per share, an upside of 25% from its previous closing price of ₹3,612.3 apiece.
The brokerage said what stands out for the company, compared to its peers, is its diversified channel mix including presence in the institutional, retail and export segments and exemplary track record of setting the right strategies, such as deferring fast moving electrical goods (FMEG), increasing share of retail and reducing engineering procurement and construction (EPC) business, and executing them well.
RR Table
JM Financial also has a “buy” rating on RR Kabel with a price target of ₹1,640 per share, implying a potential upside of 23% from its previous closing price of ₹1,332.1 apiece.
JM Financial said RR Kabel’s Earnings Per Share (EPS) growth is higher than its peers, Polycab and KEI, because the latter are being considered market leaders with a superior margin profile, KEI Industries has stronger capabilities including presence in the niche extra high voltage (EHV) business and Polycab has a dominating presence in cables, commanding a pricing premium and delivering strong return on equities and capital employed.
Key risks
As per JM Financial, the key risks for the cables and wires sector are housing infrastructure and power transmission and distribution activities being below estimates as well as sharp fluctuations in raw material prices and forex rates.
Analyst coverage on C&W stocks
| Stock | Buy | Hold | Sell |
| Polycab India | 27 | 5 | 5 |
| Industries are located in Industries | 18 | 4 | 0 |
| RR Table | 9 | 1 | 0 |
Shares of the three cables and wires stocks were trading up to 4% higher on Monday, July 14.
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