RR Kabel, KEI Industries, Polycab India shares tumble; JM Financial downgrades stocks, revises targets

Shares of RR Kabel Ltd, KEI Industries Ltd and Polycab India Ltd came under pressure in Wednesday's trading session. RR Kabel shares slumped 7.29 per cent to hit a day's low of Rs 2,658.80, while KEI Industries declined 3.02 per cent to Rs 5,174. Polycab India shares fell 2.08 per cent to Rs 8,732.

JM Financial downgraded its ratings on the three stocks, citing concerns over the growth outlook for the cables and wires (C&W) industry. The domestic brokerage cut Polycab India and KEI Industries to 'Add' from 'Buy', while RR Kabel was lowered to 'Reduce' from 'Add'. The brokerage has set 12-month target prices of Rs 9,550 for Polycab, Rs 5,750 for KEI Industries and Rs 2,750 for RR Kabel.

JM Financial on C&W industry growth

JM Financial raised three key questions around the Indian C&W industry. The brokerage said that after a period of strong growth, the industry needs to be assessed for the absence of volume growth, while elevated copper prices from late Q3 FY27/Q4 FY27 could result in weaker revenue growth over the next 12 months.

The brokerage also highlighted the potential impact of new competition. It estimates that Ultratech and Diamond Power could cumulatively generate around Rs 17,000 crore in revenue by FY29, translating into an estimated 11-12 per cent market share.

JM Financial added that competition from players such as Crompton and Bajaj could also be a factor for the industry.

According to the brokerage, the Indian C&W industry could be worth Rs 1.52 lakh crore by FY29, implying a 15 per cent CAGR. Adjusting for new competition, the addressable domestic opportunity could be Rs 1.35 lakh crore, resulting in a FY26-FY29 CAGR of 10.5 per cent, or around 12-13 per cent including exports.

Valuations in focus

JM Financial said valuations also warrant a closer look as investors assess the sector's growth outlook. According to it, select C&W stocks are currently trading at a 4-5 per cent premium to their five-year and around 25 per cent premium to their long-term average P/E multiples.

The brokerage said that with growth tapering and margins peaking, Polycab is the most susceptible among the three stocks, followed by RR Kabel and KEI Industries.