Event Participants
Executives
3 Pramod Chimmanlal Gupta, Vikas Gupta, Vishal Gupta
Analysts
15 Achal Lohade, Aditya Mehta, Akshay Kaila, Bala Murali Krishna, Bhavya Gandhi, Dhruv Jain, Keyur Pandya, Kumar Divyanshu, Mohit Jain, Natasha Jain, Neel Mehta, Praful Kumar, Santhosh Seshadri, Tanay Shah, Vidisha
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Consolidated Revenue | ₹2,034 crores | Up 35.2% YoY; highest ever quarter, driven by double-digit volume growth and ~10-12% ASP increase from commodity pass-through |
| Product Business Revenue | 80% of sales | Grew 40.7% YoY; key growth contributor |
| RAC Revenue | ₹1,401 crores | Up 38.1% YoY; highest ever quarter; volume up 20-22%, ASP up 10-12% |
| Washing Machine Revenue | ₹211 crores | Up 67.2% YoY; fully automatic segment grew 150% YoY |
| Cooler Revenue | ₹19 crores | Up 3.4% YoY |
| Electronics Revenue | 5.3% of total | Grew 60.3% YoY |
| Plastic Moulding Revenue | ₹294.6 crores | Up 7% YoY |
| JV Goodworth Revenue | ₹177.3 crores | Up from ₹147.5 crores YoY; JV EBITDA at ₹6.3 crores vs ₹4.3 crores |
| EBITDA | ₹156.2 crores | Up 12.1% YoY; margin at 7.7% |
| Net Profit | ₹75.3 crores | Up 12.9% YoY from ₹66.7 crores |
| Gross Margin | Softened | QoQ and YoY compression from elevated copper/aluminium prices and rupee depreciation; per-unit margins stable |
| Cash & Bank Balance | ₹491.3 crores | Net cash position; modest debt at quarter end |
Geographic & Segment Commentary
Room AC: RAC revenue grew 38.1% YoY to ₹1,401 crores, with volume up 20-22% and ASP up 10-12%. Industry primary sales grew 10-15% per management estimates, with secondary sales slightly better; channel and brand inventory normalized at 4.5-5.5 million units. Full-year volume growth target of ~20% with 4-5% industry outperformance.
Washing Machines: Revenue up 67.2% YoY to ₹211 crores; fully automatic segment up 150% YoY. New 1.8 million unit plant commissioned at DMIC Greater Noida, bringing total capacity to 3 million units; previous capacity ran at ~70% annualized utilization. New 18-20 kg platform launched targeting higher-value segment.
Electronics/EMS: Grew 60.3% YoY, contributing 5.3% of revenues. Job-work model with stable margins; benefiting from increased RAC outsourcing by brands.
Plastic Moulding & Components: Revenue of ₹294.6 crores, up 7% YoY. Client-directed procurement enables faster commodity pass-through; minimal margin impact. Consolidating Greater Noida operations into new Selarpur, Rajasthan facility.
Refrigerators (upcoming): Sri City facility targeting commercial production in Q4 FY27 with 1.2 million unit capacity. Anchor customer committed 30-35% capacity; first phase direct cool and side-by-side, second phase frost-free and multi-door. Meaningful revenue expected from FY28.
Compressors (upcoming): Supa facility targeting mass production December-January with 2 million line capacity; plant configured for up to 4 lines. India imports 50-60% of compressor requirements; import restrictions from April 2027 create domestic pricing power.
Goodworth Electronics (JV): Sales of ₹177.3 crores (+20.2% YoY) with EBITDA at ₹6.3 crores vs ₹4.3 crores last year.
Company-Specific & Strategic Commentary
Backward Integration: Building component-level R&D for compressors, motors, and controllers ahead of expected QCO import restrictions. Compressor first line largely for in-house AC manufacturing; second line decision expected April-May after season visibility.
Capacity Expansion: ₹400 crores capex for FY27 completing compressor, refrigerator, and Rajasthan facility consolidation. Gross block more than doubling over three years; focus shifting to sweating assets and improving capital efficiency.
Operational Efficiency: SAP implementation across all 14 units improving inventory visibility and material tracking; Big 4 firm engaged for SOP definition across key business processes; new CEO with extensive AC industry experience driving strategy and operations.
Diversification: AC contribution at 60-65% of sales targeted to reduce to 50-55% over 2-3 years through washing machine, refrigerator, compressor, and electronics growth, also reducing business seasonality.
Competitive Positioning: RAC outsourcing percentage increasing as brands face margin pressure post-PLI; PGEL positioned with full product bouquet (AC, washing machine, refrigerator, TV via JV) to serve brand partners seeking outsourcing arbitrage.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| EBITDA Margin | ~8% full year FY27 (aspiration) | Q1 at 7.3% ex-PLI; improvement driven by commodity pass-through from December; per-unit margins stable but percentage compressed by higher ASP base |
| RAC Volume Growth | ~20%+ for FY27 | Base case; low base except December; industry growth plus 4-5% share gain; prepared for higher volumes |
| FY27 Earnings | Surpass FY25 levels | Management hopeful if H2 sales remain strong |
| Refrigerator Production | Commercial production Q4 FY27 | 1.2 million capacity; anchor customer 30-35% commitment; meaningful revenue stream from FY28 |
| Compressor Production | Mass production December-January | 2 million first line capacity; ₹2,850-2,900 per unit expected pricing; second line decision by April-May |
| AC Revenue Mix | 50-55% of sales in 2-3 years | From current 60-65%; diversification via washing machine, refrigerator, compressor growth |
| Fixed Asset Turnover | >4x | Company target; focus on sweating assets after current capex cycle |
| Capex | ~₹400 crores for FY27 | Completing compressor, refrigerator, and Rajasthan facility consolidation projects |
Risks & Constraints
| Risk | Context |
|---|---|
| Commodity Price Inflation | Copper crossed $14,000/tonne and rupee at 95.5-96; partial pass-through in Q1 with further price increases delayed until December quarter; per-unit margins stable but percentage margins compressed on larger revenue base |
| Competitive Intensity | New brands entering RAC segment; pricing pressure across value chain; management restructuring operations and controlling opex to maintain relative efficiency advantage |
| Import Restrictions | Compressor imports restricted to 25% of FY25 levels until 31 March 2027, then banned; IGT copper tubing imports restricted from November; could tighten supply chain from January-February but also creates domestic pricing power |
| Supply Chain & Geopolitical Uncertainty | Overseas supplier dependence for critical components; geopolitical factors could constrain availability; management cites industry-wide exposure |
| Business Seasonality | Q1/Q4 peak season concentration in AC; Q2/Q3 lean period limits ability to push price increases and affects working capital; diversification efforts expected to reduce seasonality over 2-3 years |
Q&A Highlights
Industry Demand & Outsourcing Trends
Question: What are the primary/secondary sales trends in RAC industry and the outsourcing percentage? (Achal Lohade, Nuvama)
Answer: Industry primary sales up 10-15% YoY with 10-12% ASP growth; secondary sales seen slightly better; channel and brand inventory near normal at 4.5-5.5 million units; RAC outsourcing percentage is definitely increasing (Vishal Gupta)
Question: Will outsourcing rise materially with PLI going away? (Dhruv Jain, Ambit Capital)
Answer: Outsourcing has increased despite PLI; brands face margin pressure and price arbitrage benefits; entry-level models largely outsourced, premium models tend to stay in-house (Vishal Gupta)
Pricing, Margins & Pass-Through
Question: What percentage of commodity cost increases has been passed on? (Tanay Shah, DAM Capital)
Answer: Partially passed through, varies by customer; further price increases expected from December quarter as copper at $14,000/tonne and rupee at 95.5-96 make current pricing untenable (Vishal Gupta)
Question: How have RAC margins moved ex-PLI and when will they normalize? (Achal Lohade, Nuvama)
Answer: Significant QoQ margin improvement ex-PLI (no PLI in this quarter); full commodity pass-through not possible due to sharp copper/rupee movements; normalization expected as rupee stabilizes and pricing takes effect from December (Pramod Chimmanlal Gupta)
Question: Is 10% EBITDA margin achievable? (Bhavya Gandhi, Bajaj Alternate Investment)
Answer: Business operates on per-unit margin, not percentage; fixed manufacturing charge per unit regardless of commodity cost; per-unit margins normalizing soon, but percentage depends on commodity price levels (Pramod Chimmanlal Gupta)
Volume Guidance & Earnings
Question: Is 20%+ volume growth achievable for FY27? (Keyur Pandya, ICICI Prudential Life Insurance)
Answer: Yes; base is low except December; industry normalizing with lower channel inventory; targeting 4-5% better than industry growth; expected to surpass FY25 earnings (Pramod Chimmanlal Gupta)
Question: Will 10-15% price hikes post-GST impact consumer demand? (Natasha Jain, PhillipCapital)
Answer: Consumer sentiment strong in other sectors; AC prices have not increased over long period given efficiency gains; latent demand exists; electricity cost is a bigger deterrent than equipment price; price increases should pass through this year, unlike last year's unusual rating change disruption and high inventory (Pramod Chimmanlal Gupta)
Capacity Expansion & New Projects
Question: Where does the compressor project stand? (Neel Mehta, Equirus Securities)
Answer: Mass production targeted December-January; keeping details low profile until then (Vishal Gupta)
Question: What is the ramp-up guidance for washing machine and refrigerator? (Dhruv Jain, Ambit Capital)
Answer: No revenue guidance; washing machine growth robust (67% this quarter); refrigerator anchor customer committed 30-35% of 1.2 million capacity; meaningful revenue from FY28 (Vishal Gupta)
Question: What peak revenue can compressor business generate? (Aditya Mehta, GK Capital)
Answer: First line ~2 million units at 80% utilization; ~₹2,850-2,900 per compressor; plant can hold 4 lines; second line can be commissioned in 3-4 months vs 6 months for first (Pramod Chimmanlal Gupta)
Question: What was previous washing machine capacity utilization? (Bala Murali Krishna, Oman Investment Advisors)
Answer: ~70% annualized, over 100% in peak season; new plant adds 1.8 million taking total to 3 million; targeting 70-80% utilization by FY28 (Vikas Gupta)
Backward Integration & Import Restrictions
Question: What R&D capabilities are being built? (Praful Kumar, Dymon Asia)
Answer: Component-level design capability being built (compressors, motors, controllers) ahead of expected QCO import restrictions; new CEO with vast AC experience driving strategy; SAP implemented across 14 units; Big 4 firm engaged for SOPs (Pramod Chimmanlal Gupta, Vishal Gupta)
Question: How much of compressor requirement is imported and is domestic capacity sufficient? (Santhosh Seshadri, Avendus Spark)
Answer: 50-60% of India's compressor requirement imported; imports restricted to 25% of FY25 levels until 31 March 2027, then banned; domestic expansion may fall short, leading to tightening from January-February (Vishal Gupta)
Inventory & Balance Sheet
- Question: Why is inventory still above ₹1,000 crores despite expectations of reduction? (Bala Murali Krishna, Oman Investment Advisors)
- Answer: Same volume now costs 12-15% more due to commodity increases (5 lakh ACs cost ~₹940 crores vs ~₹700 crores last year); strategic inventory required due to import restrictions on compressors and IGT copper tubing (Pramod Chimmanlal Gupta)
Diversification & Seasonality
- Question: How will diversification impact seasonality? (Aditya Mehta, GK Capital)
- Answer: AC contribution at 60-65% of sales to reduce to 50-55% over 2-3 years with new lines; refrigerator, washing machine, and electronics reduce dependence on AC season (Pramod Chimmanlal Gupta)
Key Takeaway
PG Electroplast delivered record Q1 FY27 revenue of ₹2,034 crores (+35.2% YoY), EBITDA of ₹156.2 crores (7.7% margin), and net profit of ₹75.3 crores (+12.9% YoY). Growth was driven by RAC volume up 20-22% and washing machines up 67.2%, with commodity pass-through adding 10-12% ASP. Capacity expansion is multi-pronged: a new 1.8 million washing machine plant at DMIC Greater Noida is commissioned; a 1.2 million refrigerator facility at Sri City targets Q4 FY27 production with anchor customer at 30-35% commitment; a 2 million compressor line at Supa heads for December-January mass production. Strategic focus includes backward integration into components ahead of QCO import restrictions, SAP implementation across 14 units, and reducing AC revenue concentration from 60-65% to 50-55%. Management aspires to ~8% full-year EBITDA margin and expects to surpass FY25 earnings. Watch points: copper at $14,000/tonne, rupee at 95.5-96, RAC competitive intensity, and supply chain tightening from January.