2 Stocks that are at attractive entry levels according to Goldman Sachs

The Indian cables and wires industry is rapidly growing, driven by infrastructure development, urbanization, and increased demand for specialized cables in renewable energy. The rise in solar power adoption, especially photovoltaic (PV) projects, is significantly boosting the demand for high-quality solar cables to reduce energy loss.

Indian Wires & Cables Market is projected to grow at 11 to 13 percent CAGR between FY24-29E. The share of exports in the overall wires & cables market has increased from 5 percent in FY19 to 10 percent in FY24. The export market is expected to further grow at 10 to 11 percent CAGR between FY24-29E

Stocks to keep on your radar under the Cables and Wires segment:

1. Polycab India Ltd 

Polycab India Limited is India’s largest manufacturer of Wires and Cables and one of the fastest growing FMEG companies. PIL’s business operations span across India through 28 manufacturing facilities, 13 offices and 29 warehouses. It has also served customers in 79 countries globally. 

The international brokerage Goldman Sachs says the recent correction seen in the Cables and Wires segments offers an opportunity for fresh entry into the sector. The brokerage retained its ‘Buy’ rating on Polycab India shares, with a target price of Rs 6,510. International Brokerage Macquarie has given Polycab an outperform rating, setting a target price of Rs 7,928 per share.

The company has provided its 5-year guidance in a press release. It expects its Wires and Cables segments to grow 1.5x the market rate, with an 11-13 percent increase in EBITDA and over 10 percent contribution from exports. The FMEG business is projected to grow 1.5x to 2x the market, with an 8-10 percent EBITDA growth. For cash flow, the company anticipates a Capex of Rs 60 to 80 billion and a dividend payout ratio of more than 30 percent.

The company reported an increase of 20.4 percent YoY growth in their Revenue from operations from Rs 4,340 Crores in Q3FY24 to Rs 5,226 Crores in Q3FY25. Their Net Profit increased by 11.4 percent YoY from Rs 416.5 Crores to Rs 464 Crores over the same period. On the operating level, their EBITDA was at Rs 720 Crores in Q3FY25 with a 26 percent YoY growth. 

The shares of Polycab India Ltd, with a total market capitalization of Rs 84,235.43 Crores on Wednesday, were trading at Rs 5,600  per share which was 3 percent higher than the previous closing price of Rs 5,436.90. The shares of Polycab India Ltd generated strong returns of 136 percent in the past three years, and a return of 421 percent in the past 5 years. 

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2. KEI Industries Ltd 

KEI Industries Ltd is one of the leading manufacturers of cables and wires with a wide product portfolio spread across Extra High Voltage, High Tension and Low Tension Power Cables, House Wire, Stainless Steel Wire. It supplies a vast array of cable and wire products to core sectors, including real estate, infrastructure, power, steel, fertilizer, refinery, transportation and energy, etc. The company has 8 manufacturing plants in India along with an R&D facility with NABL accredited labs. 

Goldman Sachs remained ‘Neutral’ on KEI Industries, reiterating its price target of Rs 3,780 apiece. UBS has maintained a ‘Buy’ rating on KEI Industries Ltd but has revised the target price to Rs 5,750 from Rs 6,050. 

The company reported an increase of 20 percent YoY growth in their Revenue from operations from Rs 2,059 Crores in Q3FY24 to Rs 2,467 Crores in Q3FY25. Their Net Profit increased by 9.3  percent YoY from Rs 151 Crores to Rs 165 Crores over the same period. 

The company has a healthy order book of Rs 3,883 Crores as of Q3FY25. The company’s growth strategy includes increasing capacity through brownfield and greenfield expansion, growing their retail business, expanding distribution network, increasing presence in overseas markets, and focusing on strengthening EHV market share through increased capacity. 

The shares of KEI Industries Ltd, with a total market capitalization of Rs 34,150.50 Crores on Wednesday, were trading at Rs 3,574 per share which was 5 percent higher than the previous closing price of Rs 3,404. The shares of KEI Industries Ltd generated strong returns of 258 percent in the past three years, and a return of 568 percent in the past 5 years. 

Written By Adhvaitha Nayani 

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