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Resilient demand; margin expansion on track

* RRKABEL is experiencing healthy demand across key end-user segments. However, near-term growth is expected to moderate due to the ongoing crisisin West Asia. The company:

1) Expects marginsto remain stable, supported by effective cost pass-throughs

2) Remains focused on scaling its cables and export businesses through its INR12b capex and expansion into higher-voltage segments. While exports have been impacted by the ongoing Middle East crisis, the company expects the impact to gradually normalize over time.

* Near-term revenue growth is expected to be largely price-led, fueled by elevated copper and aluminum prices and the subsequent price hikes. Meanwhile, the FMEG segment remains in an investment phase, with the company expanding its presence in kitchen appliances and premium product categories. Management continues to target breakeven in the FMEG segment by FY27.

C&W: Pricing actions amid elevated RM costs

* Copper and aluminum prices remained elevated, rising ~20% and ~15% YoY, respectively, in FY26. Given their ~55%-60% share in RM costs, the sharp increase resulted in a meaningful cost push. The uptrend continued into 1QFY27, with prices increasing sharply by ~57%/~63% YoY in Apr– May’26.

* The C&W segment delivered strong performance in FY26, with volumes growing ~16% and revenue rising ~31%, aided by calibrated price hikes and effective pass-through of higher input costs. The company expects C&W volume growth of ~16%-18% in FY27, continuing to outpace industry growth.

* Within the segment, wire volumes are projected to grow ~11%-12%, while cable volumes are expected to witness a stronger ~25% growth over the next two years, supported by rising demand from infrastructure, data centers, renewables, and exports. As a result, the share of cables in the W&C mix is expected to increase from ~27% currently to ~31% over time.

Valuation and view

* RRKABEL witnessed an uptick in C&W’s performance during FY26 after a lower margin in FY25 led by a pickup in demand and a sharp increase in copper and aluminum prices, which are largely pass-through in nature for C&W companies. The segment’s EBIT margin expanded to ~8.9% vs ~7.4% in FY25. Additionally, lower EBIT loss from the FMEG business supported the company’s overall operating performance.

* While the C&W segment is expected to deliver strong revenue growth, driven by higher RM prices (copper/aluminum prices in Apr-May’26 rose ~57%/63% YoY), we expect competitive intensity to increase with the anticipated entry of UTCEM in this space by 4QFY27. We believe UTCEM is likely to have a higher share of wires in its product portfolio, where gaining market share is relatively easier than in cables. EBIT margin in RRKABEL’s C&W segment has remained volatile over the last few years, making margin stability a key monitorable going forward.

* Given the higher RM prices and better margin in FY26, we increase FY27/28E EPS estimate by 9%/12%, respectively. We reiterate our Neutral rating on the stock with a TP of INR2,020, based on 30x FY28 EPS.

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