Cable Stocks Under Pressure as Aluminium Rally Threatens Margins

Sharp Commodity Rally Triggers Cable Sector Selloff The Indian cable and wire manufacturing sector witnessed a sharp correction in Tuesday's trading session as copper prices breached the $12,000 per tonne mark and aluminium prices surged to multi-month highs. NSE: KEI led the decline with a 6.2% drop, while NSE: POLYCAB shed 4.8% as investors priced in the immediate impact of rising raw material costs on operating margins. The timing couldn't be worse for cable manufacturers, who were just beginning to recover from previous commodity headwinds. With copper and aluminium constituting 60-70% of total input costs for most players, the current price surge threatens to compress EBITDA margins by 15-20 basis points if sustained at current levels through Q4 FY24. This marks a significant reversal from the margin expansion trajectory most companies had guided for in their recent quarterly results. Sector-Wide Impact: Winners and Losers Emerge NSE: POLYCAB, the sector heavyweight with a market cap of ₹46,500 crore, appears relatively better positioned despite Tuesday's decline. The company's diversified product portfolio, including fans and switchgears, provides some insulation against pure-play cable margin pressure. However, with cables contributing nearly 65% to revenue, even Polycab faces headwinds. Management's previous guidance of 14-15% EBITDA margins for FY24 now looks optimistic. NSE: KEI, trading at current levels around ₹3,180, saw the steepest decline as institutional investors reassessed the company's margin sustainability. KEI's higher exposure to infrastructure cables, which carry longer price adjustment cycles, makes it particularly vulnerable to sudden commodity spikes. The company's Q2 FY24 EBITDA margin of 12.8% could compress to sub-12% levels if aluminium prices sustain above current levels. NSE: FINOLEX presents a mixed picture. While the PVC pipe business provides revenue diversification, the cable segment's contribution remains substantial. The ...