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Growth momentum builds; profitability set to improve

* RRKABEL is well-positioned to outgrow the industry, targeting ~25% growth in cables vs. ~15% industry growth, which could increase its market share from 3.0% to 4.5%. Growth is expected to be primarily volume-led, supported by capacity expansion, a sharper focus on B2B cables, and an improved product availability. The ongoing shift from unorganized to organized players, aided by a limited price differential, is estimated to drive market share gains.

* The company is also increasing capabilities in cables to strengthen competitive positioning. It is expanding its cables product range from 66kV to 220kV, enabling it to address higher-value applications across utilities, infrastructure, renewable energy, and industrial segments. This will increase its addressable market in cables to ~95%. Its INR12b capex program by FY28 is expected to support a revenue opportunity of INR50-60b through FY29. Significant export headroom, supported by its distribution network and efforts to expand international approvals, provides an additional growth lever.

* Margin expansion remains a key earnings driver, with RRKABEL targeting ~300bp expansion over the next three years from the FY25 base, aided by operating efficiencies, better product mix, higher exports, and scale benefits. The company is targeting 10.5% industry-average margins, while FMEG is likely to reach full-year break-even in FY27 and ~4-5% EBIT margins by FY29.

* Strong volume growth, market share gains, capacity expansion, and operating leverage support a favorable medium-term earnings trajectory. We estimate RRKABEL’s revenue/EBITDA/PAT CAGR at ~25%/36%/40% over FY26-28. We value RRKABEL at 40x FY28E EPS (earlier 35x) to arrive at our revised TP of INR3,400 (earlier INR2,960). Reiterate BUY.

Expanding cable portfolio to drive volume growth and margin expansion

* RRKABEL is increasingly transitioning from a largely wire-led consumer electrical company to a broader cables and electrical-solutions platform, with the next leg of growth likely to be driven by higher-value cables, B2B/institutional opportunities, exports, and improving FMEG profitability. The major medium-term opportunity for the company lies in increasing the contribution of cables within the C&W segment, with cable capacity operating at 90%+ utilization compared to ~70% for wires.

* Under the INR12b Project RRise capex program for FY26-28, nearly 80% of the investment is being directed toward cables, with capacity additions at Waghodia expected to increase overall installed capacity by 1.7x. The ongoing capex program is expected to unlock a revenue opportunity of INR50-60b by FY29 as the new capacities are commissioned. The company also has further expansion plans, which it intends to announce in due course.

* The company is expanding its product capabilities from 66kV to 220kV, enabling it to address higher-value applications across utilities, infrastructure, renewable energy, and industrial segments. This expansion should allow the company to address ~95% of the cable market, with the remaining ~5% comprising EHV cables, where it currently has no medium-term plans to enter. Further, the increasing focus on B2B cables marks a structural shift in its business model. Over the past two years, the company has built a dedicated B2B team and focused on improving product availability.

* Under Project RRISE, it targets 10.5% margin in the C&W segment by FY28 (in line with the industry average) as compared to 7.4% in FY25, implying a 3.0pp expansion. The company’s C&W segment margin expanded 1.4pp YoY to 8.9% in FY26. Its wire margins stand at ~12% in the domestic market vs. ~5-6% in exports, while cable margins are ~8% domestically and ~13% in export markets. It remains confident of achieving its targeted C&W segment margin of 10.5% by FY28, supported by operating efficiencies from increased scale, improved product availability, a favorable shift toward higher-margin products, and rising exports

Valuation and view

* Power and infrastructure remain key structural drivers for cable demand, led by India’s target of 500GW of non-fossil fuel capacity by 2030. The National Electricity Plan envisages 0.19m circuit km of transmission lines, 1,270 GVA of transformation capacity, and 33GW of HVDC links through FY32, translating into a INR9.15t transmission investment opportunity. Data centers and industrial projects are emerging as high-value B2B drivers, with India’s data center capacity expected to reach 4.0-5.0 GW by 2030 as compared to 1.3 GW by endFY26, supported by USD30b of investments.

* The company entered FY27 with a robust operating performance across both its businesses. Strong performance was led by C&W volume growth of ~17% YoY vs. industry growth of ~10-12%, and overall margin expansion. We estimate RRKABEL’s revenue/EBITDA/PAT CAGR at ~25%/36%/40% over FY26-28. We estimate OPM at 9.1%/9.5% in FY27/FY28 vs. 8.1% in FY26. C&W segment margin is estimated at 9.7%/10.0% in FY27/FY28 vs. 8.9% in FY26. Cumulative OCF is expected to improve to INR17.0b during FY27-28 vs. INR7.9b during FY25- 26. We estimate the company to become net cash positive by FY28 vs. net debt (excluding acceptances) of INR2.9b in FY26.

* RRKABEL historically traded at a discount to peers, partly due to its higher wires mix and lower margins. However, its ongoing capacity expansion is largely focused on cables, which should increase the cable mix going forward. Further, margin expansion initiatives under Project RRise are beginning to yield results, narrowing the profitability gap with leading C&W players. The stock is trading at 41x/33x FY26E/27E EPS. We value RRKABEL at 40x FY28E EPS (earlier 35x) to arrive at our revised TP of INR3,400 (earlier INR2,960). Reiterate BUY.

* Key risks: Volatility in commodity prices (copper, aluminum, and PVC), which may lead to destocking and demand slowdown in the near term; rising competitive intensity from new entrants in wires and external factors (geopolitical risks).

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