Stocks to Buy: JPMorgan projects 22% upside on these wire and cable companies

Shares of cable and wire companies KEI Industries Ltd. and Polycab India Ltd.are in focus on Monday, January 12, as brokerage firm JPMorgan initiated coverage on them, projecting an upside potential of up to 21.5% from current levels.

JPMorgan has initiated coverage with "overweight" ratings on both, KEI Industries and Polycab, with price targets of ₹5,250 and ₹8,900. This implies an upside potential of 21.5% on KEI Industries and 15.7% for Polycab. 

Both Polycab and KEI Industries, the cable and wire majors offer 'picks and shovels' exposure to structural trends of electrification and energy transition, according to JPMorgan's note.

The brokerage believes the firms are poised for near-term earnings-per-share (EPS) upgrades, driven

by a rise in copper prices in the global markets. JPMorgan's financial year 2027 estimated Earnings Per share (EPS) projections for both Polycab and KEI Industries are 8% to 12% higher than consensus estimates.

The upcoming entry of large conglomerates in this segment, particularly in the wires segment, which is a high-margin and largely organised business, could impact industry margins and the Return on Capital Employed (RoCE), JPMorgan wrote, but went on to add that compared to peers, KEI Industries and Polycab are better placed.

In March last year, Adani Group said it was foraying into the cables and wires space after its flagship firm Adani Enterprises' wholly-owned subsidiary Kutch Copper Ltd. incorporated a joint venture company Praneetha Ecocables Ltd., in which it would have a 50% stake.

In February last year, UltraTech Cement, the flagship company of the Aditya Birla Group, announced its plans to expand its presence in the construction value chain by entering the wires and cables segment with a capital expenditure of around ₹1,800 crore over two years.

Post this, KEI Industries chairman and managing director Anil Gupta had told CNBC-TV18 that the cables and wires industry is large enough to accommodate new players and said there was no concern regarding the business or margins as UltraTech Cement would take years to scale.

Here's a look at the analyst recommendations on both KEI Industries and Polycab:

Stock	Buy	Hold	Sell
KEI Industries	18	4	1
Polycab	25	6	5

Shares of KEI Industries ended the previous session 1.8% lower at ₹4,325 apiece. The stock has gained 15.9% in the last six months.

Polycab shares declined 0.8% to ₹7,690 apiece in the previous session. The stock has gained 23% in the past year.

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