JPMorgan has initiated coverage on two prominent wire and cable companies, KEI Industries and Polycab India, with overweight ratings and substantial upside projections. The brokerage firm announced these recommendations on Monday, January 12, highlighting the companies' strategic positioning in India's electrification landscape.

Price Targets and Upside Potential

JPMorgan has set ambitious price targets for both companies, reflecting strong confidence in their growth prospects:

Shares of KEI Industries ended the previous session 1.8% lower at ₹4,325.00, though the stock has gained 15.9% over the last six months. Polycab shares declined 0.8% to ₹7,690.00 in the previous session, while maintaining a strong 23% gain over the past year.

Strategic Investment Thesis

JPMorgan's bullish stance is anchored on several key factors that position both companies favorably in the evolving energy landscape. The brokerage views these wire and cable majors as offering 'picks and shovels' exposure to structural trends of electrification and energy transition. This positioning allows investors to benefit from India's broader infrastructure development and renewable energy adoption without direct exposure to project-specific risks.

The firms are expected to benefit from near-term earnings-per-share upgrades, driven primarily by rising copper prices in global markets. JPMorgan's financial year 2027 EPS projections for both companies are notably optimistic, standing 8% to 12% higher than consensus estimates.

Industry Dynamics and Competitive Landscape

While acknowledging potential challenges, JPMorgan maintains confidence in both companies' competitive positioning. The upcoming entry of large conglomerates into the wire and cable segment could impact industry margins and Return on Capital Employed. However, the brokerage believes KEI Industries and Polycab are better positioned compared to peers to navigate this increased competition.

Notably, major conglomerates have announced their entry into this space. In March of the previous year, Adani Group entered the cables and wires sector through its subsidiary Kutch Copper, which incorporated joint venture company Praneetha Ecocables with a 50% stake. Additionally, UltraTech Cement announced plans in February of the previous year to enter the wires and cables segment with a capital expenditure of approximately ₹1,800.00 crores over two years.

Analyst Sentiment and Market Position

Both companies enjoy strong analyst support across the investment community:

The overwhelming analyst support, with 18 buy recommendations for KEI Industries and 25 for Polycab, reflects broader market confidence in the wire and cable sector's growth prospects. This positive sentiment aligns with JPMorgan's assessment of the companies' potential to capitalize on India's infrastructure development and energy transition initiatives.

JPMorgan Asset Management has reduced its price target for Kaynes Technology while maintaining its overweight rating, citing expected delays in the KAVACH program that could lead to a significant cut in the company's revenue guidance. The brokerage firm announced the revision ahead of the upcoming earnings season, expressing concerns about near-term revenue execution.

Revenue Guidance Concerns

JPMorgan expects Kaynes Technology to reduce its revenue guidance substantially due to program delays:

The brokerage noted that it has cut its revenue estimates by 9-11% over the forecast period, primarily driven by delays in revenues from the KAVACH program. JPMorgan stated that these delays would likely prompt Kaynes to reduce its revenue guidance to approximately ₹4,000 crore from the current ₹4,300-4,400 crore range.

Margin Pressure and Operational Challenges

Beyond revenue concerns, JPMorgan has also adjusted its margin expectations for the company. The brokerage has reduced EBITDA margin projections by 100-120 basis points over the forecast period, anticipating lower margins in OSAT operations during the first year and a slower ramp-up compared to company guidance.

Revised Price Target and Rating

Despite the operational concerns, JPMorgan maintains its positive outlook on the stock:

The firm reduced its price target to ₹6,110 from ₹7,550, representing a 19% cut. However, JPMorgan retained its overweight rating, emphasizing that Kaynes offers the highest revenue and earnings per share CAGR of 45% among stocks in its coverage universe.

Market Context and Recent Challenges

Kaynes Technology shares have declined approximately 50% over the past three months, largely following concerns raised in a report that highlighted corporate governance issues and discrepancies in cash flow reporting. The company has provided clarifications since then, but remains under pressure heading into the earnings season. The stock's recent performance reflects broader market concerns about execution capabilities and financial transparency in the EMS sector.