Polycab, KEI Industries Share Price Target Cut Despite UltraTech Commentary on New Business
Introduction
The Indian stock market has seen significant volatility in recent days, with two major players in the cable and wire industry, Polycab India Ltd. and KEI Industries Ltd., facing a setback as brokerage firms cut their price targets on the stocks. Despite UltraTech Cement Ltd., India’s largest cement company, clarifying its stance on its new business foray, the price targets of Polycab and KEI Industries have been cut due to various factors.
Market Analysis: Why the Price Target Cuts?
Polycab’s price target has been cut by Jefferies to ₹6,485 from ₹7,700 earlier, despite the report by UltraTech Cement on its new business foray. The brokerage firm believes that Polycab’s sales and net profit are likely to grow at a strong CAGR of 22% and 28% respectively over financial year 2025-2027, driven by its cables and wires business, new orders, and improvement in its Fast Moving Electrical Goods (FMEG) business. However, Jefferies is concerned about the present market conditions and the rise in competition beyond 2027, which led to the price target cut.
What to Expect from UltraTech’s New Business Foray?
UltraTech Cement has reassured investors that it has no plans to foray into any other business beyond the cement and building products segment. The company believes that its strategy is focused on diversification, which will not impact the cable and wire industry. However, UBS has cut its price target on KEI Industries to ₹5,000 from ₹5,700 earlier, citing concerns about pricing aggression by UltraTech and the company’s target of achieving industry profitability and a return on capital employed (RoCE) of 25%.
Market Reaction: A Bullish or Bearish Outlook?
Despite the price target cuts, Polycab and KEI Industries saw a bounce on Friday after a sharp sell-off on Thursday, but could not sustain the higher levels. Polycab shares ended the trading session with gains of 0.8%, while KEI Industries’ shares ended 3.5% higher at ₹3,105. The analysts’ views on the two stocks are also mixed, with 25 out of 31 covering Polycab and 14 out of 18 covering KEI Industries having a "buy" rating on the stocks.
Conclusion
The price target cuts by brokerage firms on Polycab and KEI Industries may be a concern for investors, but it is essential to consider the underlying factors that led to the cuts. Although UltraTech Cement has clarified its stance on its new business foray, the competitive landscape and market conditions will continue to impact the cable and wire industry. For investors, it is crucial to carefully evaluate the risks and opportunities in the sector and make informed decisions accordingly. Will the price target cuts lead to a correction in the share prices of Polycab and KEI Industries? Only time will tell.
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