Sterlite Tech, KEI, Polycab, Havells: Targets for cables & wires stocks, top 2 picks

Nuvama Institutional Equities on Tuesday said KEI Industries Ltd and Polycab India Ltd remained its preferred picks in the cables and wires sector after 11 companies linked to cables, wires, conductors and optical fibre reported 43 per cent year-on-year (YoY) revenue growth in the June quarter, with EBIT rising 69 per cent. The brokerage said the growth was led by raw material cost pass-through.

Earlier, Nuvama set a 12-month target price of Rs 6,310 for KEI Industries and Rs 10,510 for Polycab India. It also assigned a target of Rs 1,700 for Havells India and Rs 770 for Sterlite Technologies Ltd post their Q1 results. The brokerage did not offer any fresh revision to its target prices in the latest note.

Volume growth subdued

According to the brokerage, volume growth for most electrical cables and wires companies remained subdued, with RR Kabel being the exception at 17 per cent growth. In contrast, optical fibre cable companies saw a sharp pricing uptick on global demand-supply tailwinds, which Nuvama expects to continue for the next two to three quarters. It said the outlook for the electrical cables and wires segment remains strong over the medium term, supported by healthy domestic capital expenditure momentum, with transmission and distribution companies' order books up 22 per cent year-on-year, as well as strong export potential. It, however, added that pricing growth could start normalising by the third quarter.

Nuvama said revenue for its tracked cables and wire companies, excluding optical fibre cable players, grew 36 per cent and EBIT increased 37 per cent, with margin expansion aided by higher raw material price pass-through, a better product mix, operating leverage and a greater contribution from higher-voltage cables. Among non-optical fibre players, RR Kabel led volume growth at 17 per cent, while others largely posted mid-single-digit to low-single-digit growth against a high Q1FY26 base. It said limited channel stocking and some destocking kept volume growth below value growth as falling commodity prices encouraged distributors to defer purchases.

Optical fibre cable players outperform

Optical fibre cable was the key outperformer, with revenue rising 115 per cent and EBIT jumping 631 per cent. Nuvama attributed this to strong hyperscaler, artificial intelligence and data-centre capital expenditure, higher optical connectivity demand and improved fibre realisations, which also lifted profitability sharply.

The brokerage said transmission and distribution is emerging as a key structural demand driver, with transmission additions expected at 17,000 circuit km in FY27 against a historical 14,000 to 15,000 circuit km, and at 20,000 to 21,000 circuit km annually over FY26 to FY30. Export growth was mixed because of disruptions in the Middle East and uncertainty around US trade, although RR Kabel reported strong export growth. It said shipments to the Middle East began normalising in May and June, while opportunities in the US are gaining traction. At the same time, capital expenditure is shifting towards MV, HV, EHV and specialised cables, with KEI pushing EHV, Universal expanding MV and HV, and RR Kabel increasing its HV presence.

On the optical fibre cable cycle, Nuvama said the upcycle is being driven by AI and data-centre spending, which is supporting stronger fibre demand and realisations. Sterlite Technologies' optical fibre segment grew 92 per cent year-on-year, with Enterprise and Data Centre making up 39 per cent of revenue, while HFCL's optical fibre cable revenue rose 175 per cent and its export mix increased to 56 per cent. It said Sterlite Technologies and HFCL have secured long-term hyperscaler orders worth USD1.1 billion, taking their order books to an all-time high. Finolex, meanwhile, reported around 30 per cent optical fibre cable volume growth, supported by exceptionally high fibre realisation, with communication cable margin reaching around 30 per cent on higher prices and low-cost legacy inventory.

Top 2 stock picks

Nuvama has maintained a positive view on the cables and wires segment, with KEI Industries and Polycab India as its preferred names, while saying the sector continues to benefit from value growth, higher-voltage cables, transmission demand, exports and a strong optical fibre cable cycle after the first-quarter results.