Goldman Sachs downgrades Polycab, cuts target for peers awaiting better entry point

Brokerage firm Goldman Sachs on Monday, March 17, downgraded shares of Polycab India Ltd and cut its price target on both Polycab and its peer KEI Industries by 23% and 17% respectively.Goldman Sachs downgraded Polycab to “neutral” from its earlier rating of “buy” and cut its price target to ₹5,005 from ₹6,510 earlier, which is nearly the same as its closing price last Thursday.

For KEI Industries, Goldman Sachs retained its “neutral” rating but cut its price target to ₹3,130 from ₹3,780 earlier, which implies a potential upside of only 3% from Thursday’s closing.

Goldman Sachs said it remains positive on the near-term demand fundamentals of India’s cables and wires sector and it also remains constructive on its export potential.

However, with Polycab and KEI Industries trading 31 times and 29 times their price-to-earnings ratio estimates for financial year 2027, the brokerage said it would wait for better entry points in these stocks now that the attractiveness of the sector has resulted in increased competition and supply build-up.

Last month, India’s largest cement company UltraTech Cement announced a foray into the cables and wires segment. It intends to invest ₹1,800 crore ($200 million)  to build a cables and wire facility in Gujarat’s Bharuch.

Following the announcement, brokerage firms Jefferies and UBS cut their price targets on Polycab and KEI Industries. Jefferies cut its price target on Polycab to ₹6,485 from ₹7,700 earlier, while maintaining its “buy” rating on the stock. UBS cut its price target on KEI Industries to ₹5,000 from ₹5,700 earlier, while Polycab’s target was cut to ₹7,700 from ₹9,000 earlier.

In a separate interaction with CNBC-TV18, KEI Industries downplayed the impact of UltraTech’s announcement, saying that it will take a while for the Aditya Birla Group company to establish its brand presence and begin commercial operations.

Of the 31 analysts that have coverage on Polycab, 24 have “buy” ratings, three have “hold” ratings and four have “sell” ratings. Meanwhile, of the 18 analysts that have coverage on KEI Industries, 14 have “buy” ratings and four have “hold” ratings.

Polycab shares ended the previous trade session 0.17% lower at ₹5,000 apiece and KEI Industries shares were down 0.55% down at ₹3,048.5 apiece. Polycab shares were down 34% from their all-time high of ₹7,605 per share, while KEI Industries shares were down 65.3% from their record high of ₹5,039.7, as of Thursday, February 13.

On Monday, March 17, Polycab shares were trading 1.07% higher at ₹5,056.45 apiece and KEI Industries shares were up 2.78% at ₹3,138.95 apiece at 11.55 am on Monday, March 17.