UBS has launched coverage on KEI Industries with a Buy rating and a target price of Rs 6,150, suggesting a potential upside of 41% from the current market price of Rs 4,355. KEI Industries stands out as a consistent performer in the cable and wires industry, being one of the few pure-play companies in this segment. UBS highlights KEI’s potential for sustained growth driven by several key factors.
The company is well-positioned to capitalize on ongoing demand for cables and wires, which is expected to remain robust over the long term.
Multiple Growth Triggers
UBS identifies several growth triggers for KEI Industries:
Sustained Growth in Cables & Wires: The demand for cables and wires is anticipated to continue its upward trajectory, supporting KEI’s revenue growth.
Market Share Gains: KEI is expected to capture a larger share of the branded housing wires and cables market, enhancing its competitive position.
Export Ramp-Up: The company’s export activities are set to increase, providing additional revenue streams and market diversification.
Expansion into Adjacent Electrical Segments: KEI has the optionality to expand into related electrical segments such as switches and switchgears, potentially broadening its product portfolio and market reach.
Increased Capital Expenditure and Strong Financial Outlook
KEI Industries has significantly ramped up its capital expenditure, increasing it to Rs 4 billion in FY24, a fourfold rise from the average spend between FY18 and FY23. UBS expects this trend to continue, with capital expenditure projected to reach Rs 7 billion annually from FY25 to FY27. This substantial investment is anticipated to drive strong topline and EBITDA compound annual growth rates (CAGRs) of 22% and 31%, respectively.
