Jefferies Slashes KEI Industries Target: Jefferies has cut its target price on the wires and cables maker to Rs 6,150 from Rs 6,920, but retained its Buy rating, arguing that the stock's sharp correction has already priced in a sizeable part of the threat from UltraTech Cement's entry into the cables market.
Jefferies analyst Lavina Quadros said KEI shares have corrected 21% from their peak and 16% since the company's Q1FY27 results beat. UltraTech's September 3 launch has heightened concerns over KEI's future profitability, particularly in its retail business, which accounts for 54% of revenue.
However, the brokerage believes the current market price already factors in around a 300-basis-point loss in KEI's retail market share over FY26–30E, along with no offset from its power transmission or exports businesses.
Jefferies has therefore retained its FY27E–30E estimates, expecting weakness in retail revenue to be offset by these other segments.
UltraTech Puts KEI's Retail Franchise In Focus
UltraTech's initial focus is expected to be on wires and low-tension cables, making KEI's retail business the segment most exposed to the new competition.
But Jefferies points to the franchise KEI has built over the past several years. The company began systematically expanding its retail market share through branding and dealer additions from FY18, taking its share from 7% in FY17 to 21% in FY26.
Over the same period, the unorganised share of the industry declined from 35–40% to around 25%.
Management has maintained that KEI can defend its retail market share, citing its established brand and loyal dealer network.
Power Cables, Exports Could Absorb Retail Pressure
Jefferies believes KEI has other growth levers if competition hurts its retail franchise.
Domestic power transmission cable sales are expected to rise 2.6 times in FY26–30E versus FY21–25, according to the brokerage. KEI has also entered new markets in Europe and the US over the past two to three years, which should contribute going forward.
Jefferies forecasts KEI sustaining a 22% market share through FY27E–30E, while EBITDA margin is expected to rise by 50 basis points to 11.5%.
The brokerage's argument is therefore straightforward: even if UltraTech takes some retail share, KEI may be able to compensate through power transmission and exports.
Management Holds On To 25% Growth Guidance
KEI management has retained its near- and medium-term outlook.
In media interviews, including CNBC TV18 on September 10, management said its established brand and loyal dealer network should help defend retail market share. It also said KEI's prices are 3–4% lower than other players.
The company has maintained its FY27E revenue growth guidance of 25% and EBITDA margin guidance of 11–12%.
Jefferies said this guidance offers 3–13% upside potential to its FY27E EPS estimates.
The brokerage also highlighted KEI's Extra High Voltage (EHV) cables within Power T&D as a highly profitable business, with only two domestic players — KEI and Universal Cables.
Why Jefferies Cut The Target Despite Retaining Buy
The revised Rs 6,150 target, down from Rs 6,920, reflects a lower valuation multiple rather than a change to Jefferies' earnings estimates.
The brokerage now values KEI at 40x September 2028E P/E, compared with 45x earlier, factoring in some multiple compression following UltraTech's more aggressive-than-previously-perceived launch.
KEI is trading at around 36x September 2027E P/E, broadly in line with its five-year average of 36x.
Jefferies continues to assign a premium to the stock because visibility on exports and power transmission is improving. Its estimates factor in 20% EPS CAGR over FY26–29E.
The Question Behind The Target Cut
The market's immediate worry is how much retail market share KEI could lose as UltraTech scales up.
Jefferies, however, believes a substantial part of that risk is already in the price. Its Buy thesis rests on KEI defending enough of its retail franchise while power transmission and exports increasingly offset any weakness.
For investors, the key variable is therefore no longer simply UltraTech's entry — but whether the competitive hit to KEI's retail business turns out to be greater than what the market has already priced in.
The brokerage identifies sharp pricing competition in cables as the downside risk.
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