Neutral KEI Industries; target of Rs 3000: Motilal Oswal

Motilal Oswal's research report on KEI Industries

We met with KEII’s management to gain insights into near-term industry trends and the company’s growth outlook. Management indicated that demand remains strong for cables, led by an increase in government capex activities. The demand for wires has also improved, supported by an improvement in real estate demand and higher copper prices, which are encouraging inventory stocking. The company has maintained its revenue growth target of ~18% in FY25E/26E and ~20% in FY27E. With rising demand from power transmission, industrial infrastructure, real estate, and data centers, KEII is strengthening its manufacturing capabilities through brownfield expansions and a new greenfield facility in Sanand, Gujarat. The company is also enhancing its backward integration efforts to improve cost efficiency and supply security. Additionally, management remains focused on expanding its retail presence, optimizing its product mix, and capitalizing on industry tailwinds to sustain long-term growth. Considering recent concerns around growth and RM cost volatility following reciprocal tariff announcements by the US, we have cut our EPS estimates by ~4%/8% for FY26/FY27. This revision reflects reduced margin estimates, as we now factor in stable margins for both cables and wires. KEII has corrected by ~25% in the past month, following announcements by UTCEM and Adani Group regarding their entry into the Cables & Wires (C&W) segment.

Outlook

The stock now trades fairly at 33x/28x FY26E/27E EPS. We maintain our Neutral rating on the stock and value KEII at 32x FY27E EPS to arrive at our TP of INR3,000.