KEI Industries Gains As UBS Initiates 'Buy' With Over 40% Upside

UBS Global Research initiated coverage on KEI Industries Ltd. with a 'buy' rating as the company's earnings have compounded consistently because of its strong presence in the wire and cable segment.

The brokerage has also set a target price of Rs 6,150 apiece, implying an upside of 40.8% from Monday's closing price.

UBS Global Research estimates Rs 4,000 crore in revenue from branded wires by the financial year 2027. A strong balance sheet and improved brand strength will make it easier for KEI Industries to expand its product range to compatible segments like switches, switchgears, and small electrical products.

When compared to peers, KEI Industries has the largest presence in cables and wires, with around 40% market share in the domestic electrification market. Its offering on high-voltage cables supported its dominant position, the brokerage said.

The domestic wire and cable industry saw a 9% value CAGR in the past decade, while KEI Industries delivered an 8% annual topline growth outperformance depending on the rise in household wires, exports, and business-to-business project supplies of low tension and high tension, the brokerage said.

KEI Industries has increased its branded wire business from 16% of revenue in 2018 to 29% in 2024. Investing in building a brand in this segment will support the company, driving the return on capital employed higher from 24% in the financial year 2024 to 28% in the in fiscal 2028. This will also lead to higher cash generation and returns in the near term.

The reason for this is that wires have remained largely an unorganised market, a trend that is expected to change. UBS Research predicts a 15% reduction in unorganised markets by 2028.

KEI Industries has grown its revenue by 18% compared to the 9% it delivered between fiscal 2014 and fiscal 2024. The company diversified from business to business and now gets 50% of its revenue from the dealer channel, UBS Research said.

The company's topline growth led to a rerating at par with peers like Polycab in the past three years. The consensus estimates largely forecast cyclical opportunities in the domestic markets. UBS Global Research sees significant opportunities for market share gains in the cables over the next two–three years due to improved distribution and capacity.

Meanwhile, a global economic slowdown, slower domestic infrastructure growth, and delays in capital expenditure are likely to pose downside risks to KEI Industries' growth outlook, the brokerage said.