Polycab, KEI Industries, Havells May Face Tough Times Ahead, Say Brokerages

The cables and wires sector, a crucial segment of the electrical industry, is facing some challenging times ahead. While these companies have historically performed well, the future could bring slower growth and margin erosion, according to analysts.

UltraTech Cements Ltd., a major player in the cement sector, plans to enter the market, initially focusing on domestic wires. Its extensive distribution network and strong contractor relationships make it a formidable competitor to established companies like Havells India Ltd., Polycab India Ltd., and V-Guard Industries Ltd. This increased competition, particularly after 2027, could hurt the profitability of these companies, according to brokerages.

Given this shift, Investec has downgraded its valuation for Havells and V-Guard.

Despite maintaining a 'buy' rating for Havells, Investec reduced its target price to Rs 1,680 from Rs 1,850, due to peak utilisation levels and rising capital expenditures, which could limit growth and profitability. Havells' revenue growth is expected to slow to 12-13% annually from 2027 to 2031, with margin erosion a concern after UltraTech’s entry.

V-Guard also faces challenges, with its target price reduced to Rs 475 from Rs 530. The company, like its peers, is dealing with peak utilisation, rising capital expenditures, and UltraTech’s looming competition, pressuring margins and growth.

Polycab’s stock has dropped 36% this year, mainly due to UltraTech's entry. Despite this, Investec has upgraded it to 'hold' from 'sell.' However, Jefferies has reduced its target price to Rs 6,485 from Rs 7,700.

Jefferies expects solid growth in sales and profit, particularly with exports, though increased competition post-2027 could impact its long-term outlook.

KEI Industries has seen its stock drop by 20-22%, following news of UltraTech’s market entry. Jefferies maintains a 'buy' rating, but has lowered its target price to Rs 4,260 from Rs 5,475, reflecting concerns about future competition, though it expects continued earnings growth.

Shares of Polycab, Havells, V-Guard and KEI Industries all fell on Monday, extending declines. While, RR Kabel stock fell the most and saw a decline of 3.96%, Havells fell over 2.85% and V-Guard fell 2.65%.

KEI Industries and Polycab also saw a nearly 2% decline on Monday.