UBS issues buy ratings on KEI Industries, Polycab India, bullish on long-term growth

KEI Industries can also branch out into an adjacent electrical segment, switches and switchgears, suggested UBS.

International brokerage UBS initiated coverage on cables and wire majors KEI Industries and Polycab India with a bullish call, as the brokerage believes the favourable demand-supply dynamics will benefit the industry leaders.

KEI Industries is the only pure-play on cables and wires, noted UBS. The firm is also a consistent earnings compounder and has multiple triggers, including growth for the C&W segment, which will sustain for a long period.

Additionally, it has the scope for gaining market share in branded housing wires and cables. KEI Industries can also branch out into an adjacent electrical segment, switches and switchgears.

The firm has boosted its capex in FY24 to Rs 400 crore, which is four times the FY18-23 average. From FY25-27, UBS expects that KEI Industries' capex will hover around the Rs 700 crore figure. The capex will drive the firm's topline and EBITDA CAGR of 22 percent and 31 percent.

As a result, UBS issued a buy call on the firm's shares, with a price target of Rs 6,150 per share. This indicates a whopping upside of 40 percent from the previous session's closing price.

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Polycab India is set to be a beneficiary of long-term electrification growth, as the firm is a "cyclical growth champion", said UBS. The wires player has a growth-levered business model, with the highest investments among peers.

UBS believes that Polycab India has significant room to raise its TAM revenue share, with the FMEG (fast-moving electrical goods) consumer pull being key to its growth. Moreover, a better-than-expected domestic volume growth and an export ramp-up are key near-term triggers for the firm.

The brokerage initiated coverage on Polycab India with a buy call and a target price of Rs 8,550 apiece, implying an upside of 29 percent.

At 9.40 am, KEI Industries shares were quoting Rs 4,508 on the NSE, higher by 3.2 percent, while Polycab India was higher by 1.3 percent at Rs 6,700 per share.