EPACK Durable Ltd - Q1 FY27 Earnings Call Summary Wednesday, August 12, 2026, 9:30 AM IST
Event Participants
Executives
2 Ajay DD Singhania (Managing Director & CEO), Rajesh Kumar Mittal (CFO)
Analysts
8 Karan Gupta (ACMIIL PMS), Manan Goyal (ICICI Securities), Nishita Shanklesha (Sapphire Capital), Pratap Maliwal (Mount Intra Finance), Rabindra Nath Nayak (Nirmal Bang Equities), Sukrit Patil (Eyesight Fintrade), Tanay Shah (DAM Capital), Ganesh (Individual Investor)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue from Operations | ₹886 crores | Highest ever quarterly revenue; +34% YoY growth, broad-based across portfolio |
| PLI Income | Nil (vs ₹13.31 crores in Q1 FY26) | No PLI accrued in current quarter; impacts YoY margin comparability |
| EBITDA | ₹55 crores | +0.70% YoY; margin reported at 6.21% vs 8.24% (incl. PLI) |
| Underlying EBITDA Margin | ~6.4% (ex-PLI) | Like-to-like margin improvement closer to 15 bps YoY, not 203 bps |
| Net Profit | ₹11.8 crores | Impacted by higher depreciation, finance costs, and forex losses |
| RAC Revenue Growth | 44% YoY | ~30% volume growth, 12-15% value growth (price pass-through, higher ASPs) |
| SDA/LDA Revenue Growth | 68% YoY | Small and Large Domestic Appliances growing faster than RAC |
| RAC Share of Revenue | Non-AC mix (SDA, LDA, components) roughly ₹226 crores | |
| Customer Count | 72+ customers, 19 product categories | Added 3 new categories in Q1; 4 more in pipeline; targeting ~75 customers, 20 product lines by FY27 end |
| Hisense Partnership Revenue | ₹65 crores (Q1); ~₹120 crores (Jan-Jun) | ~60,000 ACs produced in H1 calendar year under partnership license |
| Working Capital Days | 50-60 days | Seasonal variation; inventory normalization a key focus area |
| Capex | ₹10 crores (Q1); ₹60-70 crores (remaining FY27) | Total budget ₹450 crores; ₹340-350 crores already booked; ₹40-45 crores in CWIP |
| Capacity Utilization (Q1) | Dehradun & Bhiwadi: ~90%; Sri City: ~50% | Sri City improved from <25% previously; FY27 target >60% blended |
| Depreciation | ~₹16-17 crores (Q1) | Expected to largely stay at current levels; no significant new capacity in pipeline |
Geographic & Segment Commentary
Room Air Conditioners (RAC): Core business delivered 44% YoY revenue growth in Q1, with ~30% from volume and ~14% from price. The AC industry is expected to grow ~20% in FY27; EPACK expects to surpass industry growth. Channel inventory is at comfortable levels (3.5-4 million units industry-wide), with old BEE-rated inventory largely flushed out. Prices are updated quarterly with customers under contract, with commodity pass-through largely complete barring forex impact.
Small & Large Domestic Appliances (SDA/LDA): Segment grew 68% YoY, led by air fryers and washing machines (top-load fully automatic already in production for three MNC brands). Gross margins are 1.5-2% higher than RAC. This segment is critical to reducing AC seasonality—management aims to neutralise Q2/Q3 losses over the next 4-6 quarters, with washing machines as a key lever. Hisense front-load washing machine pilot production targeted by end of October.
Components (Motors, Controllers, Copper Tubing): Segment remains largely AC-linked and seasonal. Management is exploring non-AC component opportunities to diversify. Component volumes are currently tracking with AC growth, with the category growing in line with overall AC business.
Hisense Partnership: Produced ~60,000 ACs (Jan-Jun), generating ~₹65 crores in Q1 alone and ~₹120 crores in H1 calendar year. Five-year cumulative revenue target with Hisense crosses ₹8,000 crores (AC, washing machines, and other appliances). Front-load washing machine mass production targeted for end of September-October.
Company-Specific & Strategic Commentary
Diversification Strategy: EPACK is reducing dependence on RAC and limited anchor customers by scaling SDA, LDA, and components. The company now serves 72+ customers across 19 product categories; 3 new categories added in Q1, 4 more in pipeline. Non-AC business growing at 68% YoY vs. 44% for RAC.
PLI Benefit Rationalisation: FY27 is the final year of PLI eligibility for RAC. Historically, PLI benefits were shared
50:50 with customers (1% each). Management is negotiating to reverse PLI discounts entirely by end of FY27, which should improve EBITDA margins from FY28 onwards. Current underlying EBITDA (ex-PLI) is ~6.5%.Andhra Pradesh MoU: Committed ₹1,085 crores investment over 5 years; land of ~35 acres allotted. State government will refund ~50% of capex as investment subsidy over 10 years. Capacity ramp-up is a longer-term initiative.
Capacity Expansion & Operating Leverage: Total capex budget ₹450 crores (announced FY26); ₹340-350 crores already booked. Sri City plant utilisation improved to ~50% (from <25%); FY27 target is >60% blended utilisation across all three plants. Operating leverage expected to materialise as new facilities absorb volume.
Seasonality Mitigation: Q2 and Q3 historically loss-making quarters due to RAC dependence. Management aims to neutralise these losses over next 4-6 quarters through SDA/LDA scaling, with washing machines being a significant margin-accretive lever.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| AC Industry Growth (FY27) | ~20% growth expected | EPACK expects to surpass industry growth, as demonstrated in Q1 (44% RAC growth vs industry) |
| Overall Revenue Growth (FY27) | To exceed FY26 growth rate | Driven by RAC growth outpacing industry, SDA/LDA growing faster (~68% YoY), and new customer/category additions |
| EBITDA Margin (FY27) | ~6.5% (ex-PLI) near-term; improvement expected | PLI discount reversal to customers progressing; full reversal by end of FY27; forward-looking normalized margins should improve from FY28 |
| Blended Capacity Utilization (FY27) | >60% target | Sri City utilisation to improve significantly; non-AC products to fill off-season capacity |
| Total Capex (FY27) | ₹60-70 crores additional | Out of ₹450 crores total budget; ₹40-45 crores already in CWIP; no significant depreciation upside expected |
| Hisense Revenue (5-year cumulative) | >₹8,000 crores | AC, washing machines, and other appliances; FY27 expected to be on track vs. year 1 targets |
| Customer/Category Targets (end FY27) | ~75 customers, 20 product lines | Currently at 73 customers, 19 lines; 2-3 more in pilot production |
| Working Capital | Days to normalise to 50-60 range | Inventory levels slightly elevated due to BIS/QCO compliance requirements; normalisation expected through the year |
| Q2/Q3 Seasonality | Loss reduction over 4-6 quarters | Washing machines and SDA ramp-up expected to neutralise off-season losses; Q2 FY27 profitability not guided |
Risks & Constraints
| Risk | Context |
|---|---|
| Forex Volatility | Management flagged forex losses as the primary margin impact in Q1 (~₹7 crores QoQ increase in other expenses). Currency volatility in March-April was particularly disruptive; no hedging policy for commodities, and forex exposure remains unhedged in part. |
| Commodity Price Inflation | Copper and other commodity prices rising sharply; while quarterly price revision contracts with customers provide pass-through, there is a time lag. Management does not forward-book commodities without confirmed orders. |
| BIS/QCO Regulatory Compliance | New BEE ratings mandate (January 2026) and compressor QCO deadlines create inventory build-up requirements. Working capital elevated due to compliance-related buffer stock. Import of compressors allowed till end of 2026; domestic capacity believed sufficient, but timing risk remains. |
| PLI Sunset | FY27 is the last year of PLI eligibility for RAC. While management is reversing PLI discounts passed to customers, there is a transition risk if roll-back negotiations delay or if competition pressures margin recovery. |
| Investment Cycle Margin Pressure | Fixed costs are elevated as new capacities (Sri City, washing machines) ramp up. Q1 margins (6.21% reported) reflect higher depreciation, finance costs, and forex. Operating leverage depends on absorping volume. |
| Customer Concentration | Despite diversification, RAC growth is still largely driven by anchor customers. Management acknowledges the need to broaden customer base further. |
Q&A Highlights
Growth Drivers & Revenue Mix (RAC vs Non-AC)
Question: Can you break up the 44% RAC growth between volume and value? Is it largely anchor customer driven? (Tanay Shah, DAM Capital)
Answer: RAC growth of 44% comprises ~30% volume growth and ~14% value growth (higher ASPs and commodity pass-through). The volume growth is largely anchored by the primary customer. Commodity price increases are passed on quarterly with minimal lag; forex remains the key unpassed impact. (Ajay DD Singhania)
Question: What is the revenue split between AC and non-AC? (Pratap Maliwal, Mount Intra Finance)
Answer: ~₹660 crores of the ₹886 crores revenue comes from room AC (74%), with the balance from SDA, LDA, and components. SDA/LDA grew from ~₹80 crores last year to ~₹130 crores in Q1. (Ajay DD Singhania)
Margins & PLI Dynamics
Question: Should we treat Q1 depreciation and finance costs as a base for FY27? (Nishita Shanklesha, Sapphire Capital)
Answer: Q1 depreciation is broadly reflective of the year—no significant new capacity coming online. Finance costs have increased due to working capital requirements from 40% growth; inventory normalisation provides room for improvement. Capex of ₹60-70 crores remains for the balance year, of which ₹40-45 crores is in CWIP. (Rajesh Kumar Mittal, Ajay DD Singhania)
Question: EBITDA margins of ~6.5%—is there scope for improvement this year? (Nishita Shanklesha)
Answer: Since FY27 is the last PLI year, we have started rolling back the ~1% PLI discount passed to customers, with the goal of complete reversal by end of FY27. This should normalise margins going into FY28. We don't give forward-looking numbers. (Ajay DD Singhania)
Question: What drove the large rise in other expenses (>50% YoY)? (Pratap Maliwal, Karan Gupta)
Answer: Increase is primarily due to ~₹7 crores of forex losses quarter-on-quarter, higher freight/logistics costs from 34% revenue growth, and raw material cost increases. (Rajesh Kumar Mittal)
Working Capital & Finance Costs
Question: How have working capital days and debt moved between Q4 and Q1? (Tanay Shah, DAM Capital)
Answer: Working capital days are typically lower in Q1 (computed on a proportionate basis); around 50-60 days depending on season. Inventory is slightly elevated due to BIS compliance requirements—the industry is carrying more than requisite inventory to manage regulatory changes (compressor QCO, copper standards). Normalisation is a key focus. (Ajay DD Singhania, Rajesh Kumar Mittal)
Question: Is there any risk of compressor shortage post-QCO? (Rabindra Nath Nayak, Nirmal Bang Equities)
Answer: Imports are allowed till end of calendar 2026; domestic capacity (installed and in pipeline) should be operational by December and is sufficient for industry demand. EPACK is not investing in compressor capacity; strategic tie-ups with large compressor suppliers remain in place. (Ajay DD Singhania)
Capacity Utilisation & Operating Leverage
- Question: What is capacity utilisation across plants, and is it sustainable? (Ayush Jain, Equity Advisory)
- Answer: Q1 utilisation: Dehradun and Bhiwadi at ~90%, Sri City at ~50% (up from ~25% previously). FY26 overall utilisation was ~55% for Sri City and ~25% for Bhiwadi. We are targeting >60% blended utilisation for FY27, with non-AC products filling off-season capacity. Manufacturing facilities are fungible; utilisation is measured holistically, not per product line. (Ajay DD Singhania)
Hisense Partnership & Washing Machines
Question: How is the Hisense JV progressing? What about front-load washing machines? (Ayush Jain; Pratap Maliwal)
Answer: Jan-Jun delivered
60,000 ACs (₹120 crores revenue); Q1 alone contributed ~65 crores. Front-load washing machine pilot production on track for end of September-October; top-load fully automatic already in production for three multinational brands. Five-year cumulative Hisense revenue target exceeds ₹8,000 crores, and we are largely on track for year one. (Ajay DD Singhania)Question: Can Q2 structurally become profitable given washing machine ramp-up? (Pratap Maliwal)
Answer: Historically Q2 and Q3 are loss-making quarters due to RAC seasonality. The SDA/LDA strategy is designed first to neutralise these losses; we expect to "largely control" the seasonality impact over the next 4-6 quarters. Washing machines are a significant lever, but Q2 FY27 profitability is not guided. (Ajay DD Singhania)
Customers & Product Expansion
Question: How many OEM customers have been acquired in SDA, and what is the competitive positioning? (Karan Gupta, ACMIIL PMS)
Answer: We served 72 customers across 18 product categories at end-FY26; now at ~73 customers and 19 product lines. 2-3 more lines are in pilot production. We are targeting ~75 customers and 20 product lines by end of FY27. SDA/LDA gross margins are 1.5-2% higher than RAC. (Ajay DD Singhania)
Question: What is the reason for the component segment's de-growth? (Karan Gupta)
Answer: Components (controllers, cross-flow fans, copper tubing) are largely AC-linked and hence seasonal. We are exploring non-AC component opportunities, but current component revenue is in line with AC growth. (Ajay DD Singhania)
Andhra Pradesh MoU & Long-term Aspirations
Question: Can you provide details on the Andhra Pradesh investment package? (Ganesh, Individual Investor)
Answer: The MoU commits ₹1,085 crores investment over 5 years (effective from November 2024). ~35 acres of land allotted; capacities will be built over the longer term. The state provides ~50% of capex as investment subsidy over 10 years. This is not an immediate-term initiative. (Ajay DD Singhania)
Question: Is the ₹5,000 crore FY29 revenue target still on track? (Pratap Maliwal)
Answer: We are largely on track; seasonality needs to be minimised, and we are working towards a scenario where every quarter is profitable with a maintainable revenue mix. No formal revenue guidance for FY27 shared. (Ajay DD Singhania)
Key Takeaway
EPACK Durable delivered its highest-ever quarterly revenue of ₹886 crores in Q1 FY27, up 34% YoY, with RAC growing 44% (30% volume, 14% value) and SDA/LDA growing 68%. Reported EBITDA margin of 6.21% was optically lower versus 8.24% last year, but ex-PLI like-for-like margin improved 15 bps to ~6.4%, with forex losses (₹7 crores) and the investment cycle suppressing near-term profitability. Strategic priorities include: (1) scaling washing machines and Sri City utilisation (now ~50% vs <25% last year), (2) broadening customer base to ~75 customers across 20 product lines, and (3) fully reversing PLI discounts passed to customers by end-FY27 to normalise margins from FY28. The Hisense partnership contributed ~₹65 crores in Q1 (60,000 ACs in H1 calendar 2026), with front-load washing machine production starting by end-October and a five-year cumulative revenue target exceeding ₹8,000 crores. Management guided AC industry growth of ~20% in FY27 with EPACK outpacing, and targets >60% blended capacity utilisation. Key watch points include the PLI sunset, Q2/Q3 seasonality (losses expected to neutralise over 4-6 quarters), BIS/QCO regulatory compliance costs, and commodity/forex volatility. Working capital days are targeted to normalise to 50-60 as inventory levels stabilise.