Polycab, RR Kabel, KEI shares downgraded by JM Financial on rising competition; Stocks fall up to 8%

JM Financial has downgraded Polycab and KEI Industries to “add” from their previous “buy” recommendations each and it now has a “reduce” rating on RR Kabel from its previous “add” recommendation.

It has a target price of ₹9,550 on Polycab, indicating an upside of 7.4%; target of ₹5,750 on KEI industries, indicating an upside of 7.5%; and a ₹2,750 price target on RR Kabel, indicating a downside of 4.2% from its previous close.

JM Financial said that after a strong growth rally, it is time to question the absence of volume growth. Revenue growth could also look weaker over the next 12 months, according to the note.

JM Financial said the key question is whether the street is underestimating new competition?

It estimates Ultratech and Diamond Power to cumulatively command ₹17,000 crore revenue by the financial year 2029, and have 11%-12% of the total market share in this space.

The brokerage said the Indian cables and wires industry could be worth ₹1.52 lakh crore by FY29 with growing at a Compounded Annual Growth Rate (CAGR) of 15% during this period.

Adjusting for the new competition, the size could be ₹1.35 lakh crore, squeezing the domestic opportunity to an estimated CAGR of 10.5% between FY26-29.JM Financial said that at present, the cables and wire stocks are trading at a 4-5% premium from their five-year and a 25% premium to their long-term average price-to-earnings multiple.

The brokerage also said that Polycab is most susceptible to the risks of tapering growth and peaking margins, followed by RR Kablel and KEI Industrise

On tapering growth and peaking margin, Polycab is most susceptible to this risk, followed by RR Kabel and lastly KEI Industries, it added.

Here’s a round up of how all brokerages view these three stocks stocks:

Shares of Polycab were trading 0.8% lower at ₹8,825 apiece, KEI Industries were down 3.2% at ₹5,177.5 and RR Kabel were down 7.5% at ₹2,654 apiece at 2.08 pm.

Also Read: GPT Infra shares snap five-day losing streak, jump 11% after RVNL order win