KEI Industries, Polycab shares surge up to 4% as UBS sees upside potential of up to 41%

Shares of wire and cable makers KEI Industries rose 4% to its day’s high of Rs 4,550 while those of Polycab rose 3.7% to Rs 6,881 on BSE after the global brokerage firm UBS initiated coverage on the stocks with a buy rating and a target price of Rs 6,150 and Rs 8,550 respectively.

Stating that both companies are best plays on electrification, UBS stated that the favourable supply-demand dynamics are likely to benefit the industry leaders. The current $8 billion segment is estimated to be worth $20 billion in FY30 while the market share of the top five companies is expected to rise.

Shifting global supply chain and incumbents’ sizeable capacity should lift export revenue and the global brokerage firm sees a 16% and 24% earnings CAGR over FY24-27 for Polycab and KEI respectively.

UBS also believes that compounding earnings are likely to support expensive valuations and thinks that consensus has underappreciated potential ramp-up of exports.

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For Polycab, UBS mentioned that it is a major beneficiary of electrification infrastructure creation as with a presence in 40% of the domestic electrification market, Polycab stands to benefit from strong multi-year cyclical tailwinds in the cable & wire (C&W) segment, on robust domestic low-voltage infrastructure creation.

Additionally, the report said that Polycab’s business dominance is based on significant capacity expansion, allowing it to cater to a wide array of users, investment in distribution ramp-up, with advertising and sales promotion and a significant focus on institutional and B2B business.

Earlier in the month of July, global brokerage firm Macquarie had also initiated coverage on Polycab with an outperform rating and a target price of Rs 7,576 saying that timely expansion positions Polycab well to Loop leverage the opportunity believing that the worst is over for the FMEG segment. Premium focus, in-house manufacturing and branding focus should facilitate growth

The shares of KEI Industries have given approximately 86% returns in the last one year while in the current financial year, the stock has gone up by 43%. As for Polycab India, the stock has surged 41% in the last 1 year and 23% on a year-to-date basis.

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