Bank of America initiates buy ratings on Polycab and KEI with up to 22% upside
Bank of America has initiated coverage on Indian cable makers Polycab and KEI with buy ratings, signaling confidence in their growth from renewable energy and export demand despite broader market concerns over industry capacity.
Bank of America has initiated coverage on Indian cable manufacturers Polycab India and KEI Industries with buy ratings. The brokerage sees significant upside potential in the sector, setting a price target of ₹11,000 for Polycab and ₹6,300 for KEI. These targets imply upside potential of 22% and 14%, respectively, from recent trading levels.
Market reaction to the new coverage was muted in the near term. Polycab shares dipped 0.4% to ₹9,035 on Thursday, while KEI edged up 0.1% to ₹5,538.90. Bank of America values both equities at 40 times their two-year forward earnings, a multiple sitting 1.5 standard deviations above their historical averages.
The brokerage explicitly favors Polycab and KEI over established rival Havells. It identifies Polycab as its preferred play on franchise quality and sustained market share expansion within the highly competitive sector. This preference is rooted in the company's ability to capitalize on broader macroeconomic trends.
This optimism is underpinned by strong tailwinds in renewable energy deployment, domestic power grid expansion, and rising export opportunities. Bank of America projects Polycab’s revenue will expand at a 19% compound annual growth rate through FY29. Furthermore, earnings are forecast to grow at an 18% compound annual rate over the same period, driven directly by market-share gains and higher overseas sales volumes.
A primary concern for institutional investors has been the threat of excess manufacturing capacity as new competitors enter the Indian cable market. However, Bank of America actively dismisses the severity of this risk. The brokerage estimates that industry-wide oversupply will reach only 2% by FY28-29, suggesting demand will comfortably absorb new production.
For market participants, this initiation highlights a strategic pivot toward infrastructure-linked equities that can command valuation premiums despite near-term capacity fears. The ratings underscore how domestic power modernization and export competitiveness are reshaping growth expectations for India’s industrial manufacturers. Investors will now watch closely to see if these companies can deliver on the aggressive forward earnings multiples assigned by the brokerage.
