Wires and cables stocks: Kotak flags valuation risk 2026

Why the wires and cables sector is in focus

Kotak Institutional Equities has reiterated a cautious stance on listed wires and cables (W&C) players despite expecting the sector to keep growing faster than the broader economy. The brokerage said W&C demand could continue to expand at about 1.5 times real GDP growth, broadly in line with the long-term trend. Even so, Kotak suggested investors should be mindful of valuation comfort and profitability risks building into FY2026 and beyond. The note comes at a time when the sector is juggling strong structural demand drivers alongside a more volatile operating environment.

Kotak’s call: Sell on Polycab, KEI Industries and RR Kabel

Kotak Institutional Equities suggested a ‘Sell’ rating on Polycab India Ltd, R R Kabel Ltd and KEI Industries Ltd. The brokerage argued that current valuations leave limited room for error, particularly when multiple risks could converge in the next phase of competition. Kotak also flagged that a step-up in industry capacity, both by incumbents and new entrants, can pressure margins before demand absorbs supply over time.

Valuations look full, and profitability risks are rising

Kotak said valuations are “full”, and highlighted downside risk to profitability if commodity prices correct and pricing discipline gets challenged. The risk of a correction matters because recent sector growth has benefited from pass-through pricing in a rising raw material environment, especially copper and aluminium. If commodity prices fall sharply, channels and customers may resist price levels, which can pressure realizations and inventory values across the supply chain. Kotak’s view is that valuation comfort should be assessed alongside this operating leverage and pricing sensitivity.

UltraTech’s planned entry adds a new competitive variable

Kotak pointed to UltraTech’s entry into W&C as a key risk to pricing discipline, with entry likely by mid-August 2026. The concern is not only new capacity, but the possibility of aggressive pricing strategies that could reset competitive behaviour, especially in project and institutional channels. In a separate market episode referenced in the broader newsflow, W&C stocks fell sharply after UltraTech Cement announced its foray with an investment of ₹1,800 crore over the next two years. On that day, KEI fell 21% to ₹2,997.7, RR Kabel fell 20% to ₹890.7, and Polycab fell 19% to ₹4,673.9.

Kotak’s growth view: volume CAGR and export lift

Despite the cautious rating stance, Kotak’s industry growth estimates remain constructive. Over FY2026-29, it forecast 10% volume CAGR for the industry, led by 9% domestic growth and 20% exports growth. Kotak also expects tailwinds from exports, data centres, private sector capex and transmission. At the same time, it warned that demand momentum in power generation and distribution and government capex (infrastructure) could moderate.

Demand drivers: transmission, renewables, data centres and electrification

Kotak said power transmission has historically been a low contributor to W&C demand, but could see a step-up due to planned increases in capex and a rising preference for underground lines. This shift can benefit EHV cables, which are typically used in higher-end grid and industrial applications. The brokerage also described the FY2021-24 demand acceleration as likely driven by higher government capex, while FY2026 growth was led by a jump in renewables capacity addition and DISCOM capex under the revamped distribution sector scheme.

Separate sector material cited a broader demand narrative, including domestic electrification, renewable energy transmission, EV charging infrastructure, railway electrification, and data centre buildouts. It pegged the Indian wire and cable market size at $11 billion in 2025, projecting $15 billion by 2035 and an expected 5% to 7% CAGR. It also referenced electrification programs covering 2.86 crore households and projected data centre capacity of 14 GW by 2035, both of which require extensive cabling.

Headwinds Kotak flagged: government capex, renewables base and real estate

Kotak warned that near-term headwinds could emerge from a slowdown in government capex due to a high base, populist schemes and a stretched fiscal backdrop amid a Middle East crisis. It also noted a high base in renewables and DISCOM capex could weigh on incremental growth rates. Another risk mentioned was a decline in new real estate launches, which could impact wires demand with a lag. These factors matter because building wires demand often follows construction activity and project execution cycles rather than announcements.

What other brokerages are saying on Polycab, RR Kabel and KEI

Motilal Oswal Financial Services (MOFSL) said Polycab’s Q4FY26 operating performance was above estimates, led by better-than-estimated revenue and margin in fast moving electrical goods (FMEG), while W&C margin was in line with estimates. MOFSL also said demand outlook remains strong for the next two to three years and pointed to proactive capex limiting capacity constraints. However, it noted Polycab was quoting above its target price of ₹9,800 per share.

For RR Kabel, MOFSL said near-term revenue growth is expected to be largely price-led due to elevated copper and aluminium prices and subsequent price hikes. It added that the FMEG segment remains in an investment phase, with an expansion in kitchen appliances and premium categories, and management targets breakeven in FMEG by FY27. For KEI Industries, Equirus Securities said growth should inflect from FY27 with Sanand ramp-up driving volume recovery, while margins were trending favourably with cables EBIT margins at multi-quarter highs. It added the stock traded above its target price of ₹5,460 per share.

JM Financial, in a separate note, highlighted buoyant demand driven by institutional customers and channel stocking ahead of price hikes as copper trended up. It said C&W prices were hiked 10% to 15% sequentially in 3Q, versus a 21% quarter-on-quarter increase in copper prices, and noted multiple price hikes taken in late 2025 and January 2026. JM Financial also warned that channel partners can turn cautious on incremental stocking if copper prices correct, raising the risk of inventory losses and weaker primary off-take. It also flagged that price-conscious real estate developers may shift to cheaper brands or unbranded products after sharp price increases.

Key valuation and target markers mentioned by brokerages

Kotak suggested fair values of ₹4,200 for KEI Industries and ₹1,850 for RR Kabel. For Polycab, Kotak raised its target multiple to 33 times June 2028E price-to-earnings, giving a fair value of ₹8,700 (up from 26 times earlier). These reference points sit alongside other broker targets and show how different houses are balancing long-term growth with near-term competitive and commodity risks.

Market impact: how investors are reading the sector now

The sector’s near-term narrative is being shaped by three moving parts mentioned across notes: commodity-linked pricing, competitive intensity, and capacity expansion. When copper and aluminium rise, reported revenues can look strong due to price pass-through, but margins can be sensitive to timing, product mix, and channel inventory behaviour. When commodities correct, the risk shifts to realization pressure and potential de-stocking, which can impact primary sales.

UltraTech’s entry has added another uncertainty for how pricing discipline holds, especially if the new entrant targets large project channels where volumes can scale quickly. At the same time, brokers continue to point to demand from transmission upgrades, underground cabling, data centres, EV-related infrastructure, and electrification as supportive. The balance between these tailwinds and the risks is why some brokerages are comfortable with longer-term demand visibility but cautious on valuation and near-term margin safety.

Company background snapshot: Polycab’s scale-up in recent years

Polycab India Limited, established in 1996, is a manufacturer and marketer of FMEG and sells products under the Polycab brand, including LED lighting, switches, solar products and electric fans. A separate data point cited that Polycab’s revenues grew from ₹4,000 crore in FY14 to ₹22,400 crore in FY25E, while EBITDA rose from ₹300 crore to ₹2,964 crore over the same period. It also noted that since its IPO, Polycab’s market capitalisation grew from ₹8,100 crore to ₹113,000 crore, and that a promoter’s 68% stake was worth about ₹5,500 crore at the time referenced. These figures underline why valuation debates have become central to the investment thesis.

Conclusion: strong demand story, tighter valuation comfort

Kotak’s Sell stance on Polycab, KEI Industries and RR Kabel sits alongside an otherwise supportive demand outlook for the W&C industry, including a 10% volume CAGR forecast over FY2026-29. The key swing factors highlighted are commodity price direction, the sector’s ability to sustain pricing discipline, and how quickly incremental capacity gets absorbed. UltraTech’s expected entry by mid-August 2026 is a near-term marker investors are likely to track closely. Until there is more clarity on competitive behaviour and margin outcomes, the sector may continue to see divergent brokerage views despite the same long-term demand drivers.