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The search has led investors rushing for proxy sectors likely to benefit from these trends. A case in point is the country’s $10 billion cables and wires (C&W) sector. The total market capitalisation of listed C&W companies such as Polycab, KEI Industries, Finolex Cables and Havells has trebled in the past three years to hit $30 billion.
The housing segment is the biggest revenue contributor for C&W companies with a share of nearly 33%. The segment is expected to grow 14% annually in the next four years, according to Technopak. Power cables, which account for a quarter of the total revenue of C&W companies, may benefit from overhead wires going underground and the strengthening of the power distribution network and railway infrastructure.
The highest growth in the C&W segment is expected in specialised cables used for charging EVs, setting up data centres, and evacuating solar energy. Since there are limited investment opportunities in the EV manufacturing chain as components are largely imported, investors have increased their allocation to C&W to participate in the early growth cycle.
A home-charging EV unit, including15-60 metres of threecore wire and MCBs, costs `10,000- 15,000. Besides, apartment complexes are increasingly installing charging stations in parking areas. As a result, the revenue prospects of C&W will increase.
EVs may grow 30% annually in the next 10 years to 23 million, according to Axis Capital. The step-up in renewable energy is another opportunity for the C&W sector. The cable demand to evacuate power from a solar plant is about four times that of a thermal power plant. C&W companies are likely to expand revenue by 12-13% annually in the next five years, compared with 10% between FY15 and FY23. Organised C&W companies have started gaining market share from unorganised players who account for about 30% of the total market.
In the organised sector, Polycab is the largest company with a market share of 15% followed by KEI Industries at 8%, and Havells at 7.5%. The average forward priceearnings (P/E) multiple of the sector has increased to 48.8 from 42 in two years. The premium valuation is likely to be sustained given the structural long-term story
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