BofA initiates coverage on Polycab, KEI with buy ratings; sees up to 22% upside
BofA expects India's wires and cables industry to grow at a 14% compound annual rate between FY26 and FY29, supported by spending on infrastructure, renewable energy and power grids, as well as exports.
Mumbai-based BofA Securities has started covering Polycab India and KEI Industries, rating both stocks as Buy. The brokerage firm sees significant upside potential for both companies, with a price target of ₹11,000 for Polycab, indicating a potential 22% upside, and ₹6,300 for KEI, suggesting a 14% upside.
Polycab shares experienced a slight decline of 0.4%, trading at ₹9,035 on Thursday, while KEI gained 0.1%, reaching ₹5,538.90.
BofA has valued both stocks at 40 times two-year forward earnings, placing them 1.5 standard deviations above their historical averages. The brokerage firm prefers Polycab and KEI over Havells.
Looking ahead, BofA expects the India wires and cables industry to grow at a 14% compound annual rate between FY26 and FY29, driven by infrastructure spending, renewable energy projects, power grid development, and export growth.
Polycab, which dominates the market with a 24% market share, is the brokerage's top pick among the two. The firm anticipates Polycab's revenue to grow at a 19% compound annual growth rate (CAGR) through FY29, fueled by increased market share, higher exports, and revenue growth. Similarly, earnings are expected to grow at an 18% CAGR over the same period.
KEI, holding a 9% market share, presents a faster growth profile. BofA forecasts revenue and earnings growth of 22% and 20% CAGRs, respectively, through FY29. This growth is supported by capacity expansion and an improving product mix. The company's Sanand plant is expected to play a crucial role in future growth as capacity increases.
One concern for investors is the potential excess capacity as new competitors enter the industry. BofA estimates oversupply at a mere 2% by FY28-29.
Written by urgent.news from The Economic Times - Top News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
