Goldman Sachs Flags Rising Competition in Cable & Wire Sector

Polycab and KEI Industries Face Target Price Cuts as Competition Intensifies

Goldman Sachs has highlighted growing competition in the cable and wire (C&W) sector, leading to increased supply build-up and pricing pressures. The brokerage firm has downgraded Polycab India Ltd. to ‘Neutral’, cutting its target price to ₹5,005 from ₹6,510 per share. KEI Industries Ltd. remains on a ‘Neutral’ rating, but its target price has been lowered to ₹3,130 from ₹3,780 per share.

This development comes weeks after Aditya Birla Capital’s UltraTech Cement announced its foray into the cable and wire industry, signaling a potential shake-up in a sector currently dominated by established players.

Highlights:

✔ Goldman Sachs sees increasing competition in the cable and wire sector
✔ Polycab India downgraded to ‘Neutral’ with a target price cut from ₹6,510 to ₹5,005
✔ KEI Industries remains ‘Neutral’ with a revised target price of ₹3,130 from ₹3,780
✔ UltraTech Cement’s entry could disrupt pricing and profitability for incumbents
✔ Polycab trading at 31x FY27 earnings; KEI Industries at 29x FY27 earnings

Goldman Sachs Adjusts Forecasts for Polycab and KEI Amid Market Uncertainty

Stock Valuations and Competition Create Challenges for Existing Players

Goldman Sachs remains cautiously optimistic about the near-term demand fundamentals of the cable and wire industry, particularly with strong export potential. However, the brokerage has noted that rising competition and stretched valuations have made sector stocks less attractive at current levels.

As of now, Polycab and KEI Industries are trading at FY27 price-to-earnings (P/E) ratios of 31x and 29x, respectively, which suggests that their stocks are priced at premium levels. Goldman Sachs is waiting for better entry points before turning bullish on these companies.

This recalibration follows the growing interest from new players, most notably UltraTech Cement’s unexpected entry into the C&W market.

UltraTech Cement’s Entry Could Reshape the Competitive Landscape

Cable and Wire Industry Faces Pricing Pressures from New Entrants

UltraTech Cement’s announcement to venture into the cable and wire industry has raised concerns among market experts, who believe this move could lead to long-term disruption in the sector.

Why UltraTech’s Entry is Significant:

• Established Market Presence: UltraTech, a major player in India’s cement industry, has a strong distribution network and brand credibility that could give it a head start.
• Potential for Aggressive Pricing: If UltraTech adopts a low-margin, high-volume approach, it could erode profitability for existing market leaders like Polycab and KEI Industries.
• Strategic Expansion: Unlike the paints business, which faces higher barriers to entry, the cable and wire industry could be easier for UltraTech to penetrate due to lower capital intensity and overlapping supply chains with its cement business.

According to market analysts, if UltraTech Cement aggressively competes on pricing in the cable and wire segment, it could trigger margin pressures across the industry. This, in turn, may force existing players to lower prices, impacting their profitability and stock performance in the long run.

Stock Market Impact: Polycab and KEI Industries Under Investor Focus

Recent Trading Session Reflects Market Uncertainty

With Goldman Sachs’ revised outlook and UltraTech’s sectoral entry, investors have turned cautious regarding Polycab and KEI Industries.

Stock Performance (As of Monday’s Closing):

• Polycab India Ltd. closed at ₹5,003, down 0.11%
• KEI Industries Ltd. closed at ₹3,053, down 0.38%

Market observers expect increased volatility in these stocks as investors reassess long-term growth potential and competition risks.