KEI Industries Stock Gains 4% After Goldman Sachs ‘Buy’ Upgrade

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On April 17, 2025, shares of KEI Industries Ltd., a leading Indian manufacturer of wires and cables, surged over 4% during intraday trading on the BSE and NSE, reaching ₹2,868 per share. The sharp rally was triggered by an upgrade from global investment bank Goldman Sachs, which revised its rating on KEI Industries from ‘Neutral’ to ‘Buy’ for the first time since initiating coverage in November 2023. Despite trimming its price target from ₹3,130 to ₹2,980, implying an 8% upside from current levels, Goldman Sachs cited an attractive risk-reward profile as the key factor behind the upgrade. This article provides a comprehensive analysis of the stock surge, the reasons for Goldman Sachs’ upgrade, KEI Industries’ business performance, the broader market context, challenges, opportunities, and implications for investors.

The Goldman Sachs Upgrade: A Catalyst for the Rally

Goldman Sachs’ upgrade to a ‘Buy’ rating on KEI Industries sparked significant market interest, driving the stock to a high of ₹2,868 on April 17, 2025, a 4% increase from its previous close of ₹2,754.90. The brokerage highlighted several factors supporting its bullish stance:

• Attractive Risk-Reward: Goldman Sachs noted that KEI Industries offers a compelling risk-reward ratio, given its strong fundamentals and growth potential in the cables and wires sector.
• Near-Term Demand Strength: The brokerage expects cable and wire companies, including KEI, to continue benefiting from ongoing capital expenditure (capex) in the power and infrastructure sectors in the near term, although it cautioned that growth could moderate by FY27 due to potential capex deferrals.
• Export Opportunities: India accounts for only 2–3% of the global cable and wire export market, presenting significant growth potential for KEI Industries, which has approvals to export to markets like the U.S. and Europe.
• Margin Resilience: Goldman Sachs praised KEI’s ability to maintain commendable margin resilience despite sectoral challenges, such as tariff uncertainties and commodity price volatility.

However, the brokerage lowered its price target to ₹2,980 from ₹3,130, reflecting concerns about potential capex deferrals and increased competition in the sector. Despite the reduced target, the implied 8% upside from the stock’s trading level on April 17 signalled confidence in KEI’s near-term performance.

The upgrade also contrasted with Goldman Sachs’ downgrade of infrastructure giant Larsen & Toubro (L&T) from ‘Buy’ to ‘Neutral’, with a revised target price of ₹3,330, citing expectations of capex deferrals. This shift underscores Goldman Sachs’ selective optimism within the industrials sector, favouring companies like KEI with strong growth prospects in specific niches.

KEI Industries: Business Overview and Performance

KEI Industries Ltd., incorporated in 1968, is one of India’s leading manufacturers of wires and cables, with a market capitalisation of approximately ₹26,323.78 crore as of April 16, 2025. The company operates across three key segments:

• Cables and Wires: This segment, which includes low tension (LT), high tension (HT), and extra high voltage (EHV) cables, control and instrumentation cables, specialty cables, and house wires, accounted for ₹2,351.7 crore in revenue in Q3 FY25, up 25.95% YoY.
• Stainless Steel Wire: This segment contributed ₹55.07 crore in Q3 FY25, reflecting a 19.73% YoY increase.
• Engineering, Procurement, and Construction (EPC) Projects: This segment, which includes turnkey projects for high-voltage cabling and substations, saw a 79.86% YoY revenue decline to ₹75.89 crore in Q3 FY25, reflecting project-specific volatility.

KEI Industries reported strong financial performance in Q3 FY25, with consolidated revenue of ₹2,467 crore, up 19.81% YoY, and net profit of ₹164.81 crore, up 9.38% YoY. For the nine months of FY25, revenue surged by 17.68% to ₹6,807 crore, and net profit rose by 13.97% to ₹469.87 crore. The company’s focus on retail expansion, export growth, and capacity additions has driven its growth trajectory.

KEI’s strategic initiatives include a ₹2,000 crore investment to boost capacity by 60–70%, targeting a 13% market share by FY25. The company aims to double its export revenue by FY26, capitalising on global demand for cables and wires. Additionally, KEI’s board declared an interim dividend of ₹4 per share in January 2025, reflecting its commitment to shareholder value.

Market Reaction and Analyst Sentiment

The 4% surge in KEI Industries’ stock price on April 17, 2025, reflects strong market confidence in the Goldman Sachs upgrade. The stock opened at ₹2,785, reached a high of ₹2,868, and traded at ₹2,848.5 by midday, up 3.4% from its previous close. Despite the rally, the stock remains 43% below its 52-week high of ₹5,039.70, indicating room for recovery if positive momentum continues.

Analyst sentiment toward KEI Industries is overwhelmingly positive, with 15 out of 19 analysts covering the stock maintaining a ‘Buy’ rating and four assigning a ‘Neutral’ rating. No analysts have a ‘Sell’ call, underscoring the stock’s strong fundamentals and growth outlook. The median target price from 17 analysts is ₹4,256.29, suggesting significant upside potential over the next 12 months.

However, some analysts have expressed caution. For instance, Motilal Oswal Financial Services maintained a ‘Neutral’ rating on KEI Industries on April 9, 2025, with a target price of ₹3,000, citing concerns about raw material cost volatility and U.S. tariff uncertainties. These factors could impact margins and growth in the medium term.

Industry Context: Cables and Wires Sector

The cables and wires sector in India is poised for growth, driven by increasing electricity consumption, infrastructure development, and renewable energy projects. India’s power and infrastructure capex is expected to remain robust in the near term, supporting demand for KEI’s products. The country’s low share of global cable and wire exports (2–3%) presents a significant opportunity for KEI to expand its international presence, particularly in markets adopting a ‘China +1’ strategy to diversify supply chains.

However, the sector faces challenges, including:

• Capex Deferrals: Goldman Sachs cautioned that factory capex deferrals could lead to lower order inflows by FY27, potentially moderating growth for cable and wire companies.
• Commodity Price Volatility: Fluctuations in copper and aluminium prices, key raw materials for cables, could pressure margins if not passed on to customers.
• Increased Competition: The entry of new players, such as Adani Enterprises, into the wires and cables segment has led to competitive pressures, with KEI’s stock hitting a 52-week low of ₹2,424 on March 20, 2025, following Adani’s announcement.
• Tariff Uncertainties: Potential U.S. tariffs could impact export growth, although KEI’s management remains confident in navigating these challenges.

Despite these headwinds, KEI Industries is well-positioned to benefit from the sector’s long-term growth drivers, including urbanisation, electrification, and renewable energy adoption. The company’s focus on high-margin retail sales and export markets further strengthens its competitive edge.

Challenges Facing KEI Industries

While the Goldman Sachs upgrade and stock rally are positive developments, KEI Industries faces several challenges that could impact its growth:

1. Commodity Price Risks: Volatility in copper and aluminium prices remains a concern, as KEI may not always be able to fully pass on cost increases to customers, potentially squeezing margins.
2. Capex Moderation: Goldman Sachs’s caution about capex deferrals by FY27 could lead to reduced order inflows, particularly in the EPC segment, which already saw a significant revenue decline in Q3 FY25.
3. Competitive Pressures: The entry of large conglomerates like Adani Enterprises into the cables and wires market could intensify competition, potentially impacting KEI’s market share and pricing power.
4. Export Market Risks: While export opportunities are significant, geopolitical tensions and tariff uncertainties, particularly in the U.S., could pose challenges to KEI’s ambitious export growth plans.
5. High Valuation: KEI Industries is trading at a price-to-earnings (P/E) ratio of 41.24, significantly higher than the sector median of 29.91, which may limit upside if earnings growth slows.

Opportunities for Growth

Despite these challenges, KEI Industries is well-equipped to capitalise on numerous opportunities:

1. Infrastructure and Power Capex: Ongoing investments in India’s power and infrastructure sectors, including smart cities and renewable energy projects, will drive demand for KEI’s cables and wires.
2. Export Expansion: With India’s low share of global cable exports, KEI’s approvals for markets like the U.S. and Europe position it to capture a larger share of international demand.
3. Retail Focus: KEI’s emphasis on high-margin retail sales, particularly in house wires, is expected to boost profitability. The company aims to increase its retail market share from 5% to high single digits over the next few years.
4. Capacity Additions: The ₹2,000 crore investment to expand capacity by 60–70% will enable KEI to meet rising demand and achieve its target of a 13% market share by FY25.
5. Renewable Energy and EVS: The growing adoption of renewable energy and electric vehicles (EVS) in India will increase demand for specialised cables, an area where KEI has a competitive edge.

Implications for Investors

The 4% stock surge following Goldman Sachs’ upgrade highlights KEI Industries’ appeal as an investment opportunity in the cables and wires sector. The company’s strong financial performance, with 19.81% YoY revenue growth and 9.38% YoY profit growth in Q3 FY25, underscores its growth potential. Its high ROE of 18.44% over the past five years, interim dividend of ₹4 per share, and positive analyst sentiment further enhance its attractiveness.

However, investors should consider the following risks:

• Valuation Concerns: At a P/E ratio of 41.24, KEI’s stock is trading at a premium, which may limit upside if earnings growth does not meet expectations.
• Sectoral Headwinds: Capex deferrals, commodity price volatility, and competitive pressures could impact future performance.
• Market Volatility: The stock’s 43% decline from its 52-week high of ₹5,039.70 reflects its sensitivity to market sentiment and sectoral developments, such as Adani’s entry into the market.

Analysts recommend that investors with a long-term horizon consider KEI Industries for its strong fundamentals and exposure to India’s infrastructure and electrification themes. However, those with a shorter-term outlook may want to wait for better entry points, as suggested by some analysts following recent price target cuts.

Broader Market Implications

The Goldman Sachs upgrade and KEI Industries’ stock rally have broader implications for India’s industrials and cables, and wires sectors. The positive outlook for near-term demand in power and infrastructure capex highlights the sector’s role in supporting India’s economic growth. As the country aims to expand its renewable energy capacity to 500 GW by 2030, companies like KEI will play a critical role in supplying essential infrastructure components.

The upgrade also reflects selective optimism within the industrials sector, with Goldman Sachs favouring companies like KEI over larger conglomerates like L&T, which face capex deferral risks. This shift could influence investor allocations, with a focus on mid-cap companies with strong growth prospects in niche segments.

From a global perspective, KEI’s export ambitions align with India’s emergence as a beneficiary of the ‘China +1’ strategy, as global corporates seek alternative manufacturing hubs. The company’s ability to capitalise on this trend could position it as a key player in the global cables and wires market.

Conclusion

The 4% surge in KEI Industries’ stock price on April 17, 2025, following Goldman Sachs’ upgrade to ‘Buy’, underscores the company’s strong growth prospects in India’s cables and wires sector. The brokerage’s confidence in KEI’s risk-reward profile, near-term demand strength, and export potential has resonated with investors, driving positive market sentiment. With robust financial performance, strategic capacity expansions, and a focus on high-margin retail and export markets, KEI is well-positioned to capitalise on India’s infrastructure and electrification boom.

However, challenges such as commodity price volatility, competitive pressures, and potential capex deferrals warrant caution. Investors should weigh KEI’s high valuation and sectoral risks against its long-term growth potential. As India’s cables and wires sector continues to evolve, KEI Industries remains a compelling investment opportunity, supported by strong fundamentals and a favourable industry outlook.