“The launch of Ultratech has raised investor concerns about KEI’s future profitability. We believe current market prices are leading to around 300 basis points of market share loss for KEI in the retail segment in FY26-30 without offset from power or exports,” the brokerage said in a note.
Jeffries took into account a 50 bps decline in KEI Industries’ profitability. 26-30PF, noting that the company’s retail segment remains a key risk area due to UltraTech Cement’s entry into the low voltage wire and cable market. Retail accounts for 54% of KEI’s revenue and is primarily related to housing.
KEI has steadily increased its retail share through branding and dealer expansion since 2017-18, with its retail market share growing from 7% in FY17 to 21% in FY26. Over the same period, the share of the unorganized industry has come down from 35-40% to around 25%.
Jeffries expects KEI’s expansion into Europe and the US over the past 2-3 years to begin to bear fruit. The company also expects domestic transmission capex to grow 2.6 times in FY26-30E compared to FY21-25.
The brokerage’s target price assumes KEI’s retail market share to remain at 22% in FY27-30E and EBITDA margin to rise by 50 bps. up to 11.5%. However, even if KEI loses some market share, Jeffries believes the company is well positioned to offset the impact through domestic sales and exports of power cables.
KEI Industries trades at a P/E of 36x September 2027 earnings, in line with its five-year average. Jeffries’ target price cut values the company at 40x earnings P/E in September 2028, up from 45x previously, as it accounts for some multiple compression following UltraTech’s more aggressive-than-expected launch. The revised valuation remains at a premium to the five-year average P/E of 36x, supported by improved export and transmission transparency. Jefferies expects KEI’s earnings per share to grow at a CAGR of 20% over FY26-FY29. According to the brokerage company, the main risk of lower prices is intense price competition for cables.
Also read: SBI’s 80 paise masterstroke: How NSE IPO can fetch Rs 2,850 crore jackpot and 2.23025% return
However, KEI Industries management said the company can defend its retail market share by relying on its established brand and loyal dealer network, while its prices remain competitive and 3-4% lower than other players. Management maintained its forecast for revenue growth of 25% for FY27E and EBITDA margin of 11-12%, implying upside of 3-13% compared to the brokerage’s EPS estimates for FY27E.
In Power T&D, Extra High Voltage (EHV) cables remain highly profitable and there are currently only two domestic players in this segment, KEI and Universal Cables.
(Disclaimer: The recommendations, suggestions, views and opinions expressed by experts are their own. They do not reflect the views of The Economic Times)