KEI Industries' Capacity Expansion To Drive Growth, Says Motilal Oswal; Maintains 'Neutral' Rating

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Motilal Oswal Report

KEI Industries Ltd. has corrected by ~25% in the past month following announcements by UltraTech Cement and Adani Group regarding their entry into the cables and wires segment.

We had anticipated a negative reaction for cables and wires companies and subsequently downgraded our rating on KEI Industries and RR Kabel to Neutral, expecting a de-rating in valuation multiples following the announcement of entry by sizeable players in this business.

That said, KEI’s business fundamentals remain strong, and we do not foresee any financial impact over the next two years, as:

1. UltraTech's plant is expected to be commissioned by Dec’26, and

2. Adani Group has not yet announced its capex plans in this segment.

We have reduced our margin estimates and now factor in stable margin for cables in FY26E/27E, resulting in a 4%/8% EPS reduction for FY26E/27E. We expect KEI’s EPS to clock a 16% CAGR over FY25-27E.

The stock now trades fairly at 33x/28x FY26E/27E EPS. We maintain our Neutral rating on the stock and value KEI at 32x FY27E EPS to arrive at our target price of Rs 3,000.

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