“Ultratech’s launch has raised investor concerns on KEI’s future profitability. We believe current market price factors in approx. 300 bps loss in market share for KEI over FY26-30E in its retail segment and no offset from power or exports,” the brokerage said in a note.
Jefferies has factored in a 50 bps compression in KEI Industries’ margins over FY26-30E, while noting that the company’s retail segment remains the key area of risk from UltraTech Cement’s entry into wires and low-tension cables. Retail contributes 54% of KEI’s revenue and is primarily driven by housing.
KEI has steadily increased its retail share through branding and dealer expansion since 2017-18, with its retail market share rising from 7% in FY17 to 21% in FY26. Over the same period, the industry’s unorganised share declined from 35-40% to around 25%.
Jefferies expects KEI’s expansion into Europe and the US over the past 2-3 years to start yielding results. It also expects domestic power transmission capex to rise 2.6x in FY26E-30E versus FY21-25.
The brokerage’s price target assumes KEI’s retail market share remains at 22% over FY27E-30E, while EBITDA margin rises by 50 bps to 11.5%. However, even if KEI loses some market share, Jefferies believes the company is well placed to offset the impact through domestic power transmission cable sales and exports.
KEI Industries is trading at 36x P/E on September 2027E earnings, in line with its five-year average. Jefferies’ target price cut values the company at 40x P/E on September 2028E earnings, compared with 45x earlier, as it factors in some multiple compression following a more aggressive-than-expected launch by UltraTech.The revised valuation remains at a premium to the five-year average P/E of 36x, supported by improving visibility on exports and power transmission. Jefferies expects KEI’s EPS to grow at a 20% CAGR over FY26-29E. The key downside risk, according to the brokerage, is sharp pricing competition in cables.
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However, KEI Industries’ management said the company can defend its retail market share, supported by its established brand and loyal dealer network, while its prices remain competitive at 3-4% lower than other players. Management maintained its FY27E guidance of 25% revenue growth and 11-12% EBITDA margin, which implies 3-13% upside potential to the brokerage’s FY27E EPS estimates.
Within Power T&D, Extra High Voltage (EHV) cables remain highly profitable, with only two domestic players, KEI and Universal Cables, currently present in the segment.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
