Epack Durable: Q1FY25 Earnings Call Highlights

Strong Q1 FY25 results, driven by robust demand for ACs and successful expansion initiatives. EPACK anticipates the market to double in size over the next 4-5 years and reach 40 million units by 2029

Money Muscle

Sep 26, 2024

epackdurable.com | NSE: EPACK

Key Financial Highlights (Q1 FY25):

Revenue from operations: INR 774 crores (up 77% YoY)
EBITDA: INR 52 crores (up 77% YoY)
EBITDA Margin: 6.68%
Net Profit: INR 23 crores (up 169% YoY)
Profit after Tax Margin: 3.02%

Key Operational Highlights (Q1 FY25):

Sri City (Andhra Pradesh) facility fully operational across all product lines.
AC product revenue grew 82% YoY, driven by new customers and products.
Small Domestic Appliances (SDA) now contribute 15% of revenue.
Company to launch Fully Automatic Washing Machines, Room Oil Heaters, Air Fryers, Tower Fans, Induction Water Heaters, and Hair Dryers in the coming quarters.
Working capital days reduced from 45 days in Q4 FY24 to 41 days in Q1 FY25.

Epavo Acquisition

EPACK announced an increase in its stake in Epavo, a BLDC motor manufacturer, from 26% to 50%, making it a joint venture with Ram Ratna Wires Limited (RRWL).

Strategic investment for EPACK to secure a supply of BLDC motors for its AC and other product lines.
Epavo expected to become profitable as it moves to mass production at its new facility in Bhiwadi by the end of the year.
Epavo is expected to supply 40%-50% of EPACK's motor requirements.
The management structure will be a 50-50 split between EPACK and RRWL.

Growth Outlook

Management expects overall revenue growth of 45% in FY25, driven by strong AC demand and new product launches.
EPACK aims to outperform the AC industry, which is expected to grow by 25% in FY25.
The company is confident in maintaining EBITDA margins at similar levels to FY24 (approximately 15%).

Key Quotes

"Overall, it has been a very healthy and encouraging quarter driven by a combination of market dynamics and our expansion plans." - Ajay Singhania, Managing Director & CEO
"We are poised to outgrow the market growth. So, maybe this year the market is estimated to grow at least 25% plus on a complete year basis, whereas the EPACK is definitely going to outgrow the market growth." - Ajay Singhania, Managing Director & CEO
"This is a very strategic investment and both the groups, EPACK as well as RRWL are strong enough to grow this business on a standalone basis. So, we see a good opportunity to scale up this business to a standalone entity going forward." - Ajay Singhania, Managing Director & CEO

Conclusion

EPACK Durable reported strong Q1 FY25 results, driven by robust demand for ACs and successful expansion initiatives. The company's strategic investment in Epavo is expected to secure its BLDC motor supply and support future growth. With a positive outlook for the AC market and a robust pipeline of new products, EPACK is well-positioned to achieve its growth targets.

EPACK Durable Limited Q1 FY25 Results Conference Call FAQ

1. What is the current status of EPACK Durable's Sri City manufacturing facility?

The Sri City facility in Andhra Pradesh is fully operational across all product lines. This expansion is a key driver of the company's growth and enables EPACK to better serve its customers across India, especially those in the south.

2. How did the company's core product lines perform in Q1 FY25?

The product business continues to be the foundation of EPACK's success, representing 98% of total Q1 revenues. This reflects a robust 77% year-on-year growth. Air conditioners (AC), in particular, make up 86% of product revenue and grew impressively at 82% year-on-year.

3. What is the nature of EPACK Durable's investment in Epavo?

EPACK is increasing its equity stake in Epavo, a motor manufacturing company, from 26% to 50%, forming a 50-50 joint venture with Ram Ratna Wires Limited (RRWL). This strategic move allows EPACK to secure a supply of BLDC motors for its AC and future product lines, including ceiling fans.

4. What is the outlook for Epavo's profitability and market reach?

Epavo is poised for significant growth as it transitions to mass production at its new Bhiwadi facility, operational by the end of 2024. The company will initially focus on BLDC motors for AC units, ceiling fans, and HVLS fans but plans to expand its offerings to include induction and universal motors in the future.

5. How does EPACK Durable plan to mitigate the risks associated with high customer concentration in its AC business?

EPACK has been actively diversifying its customer base. While previously three customers accounted for over 70% of sales, this has decreased to eight customers contributing to 80% of sales. The company expects this trend to continue with the expansion of its product portfolio and component business.

6. What is EPACK Durable's strategy for growth in the small domestic appliance segment?

The company plans to launch several new products, including fully automatic washing machines, room oil heaters, air fryers, tower fans, induction water heaters, and hair dryers. They are strategically focusing on fully automatic top-load washing machines to address a gap in the market and have already secured interest from several major brands.

7. What is the expected impact of the PLI scheme on EPACK Durable's financials in FY25?

EPACK expects to receive a total of INR 37.5 crores in PLI incentives during FY25, of which INR 14.5 crores were accrued in Q1. The remaining incentives will be accrued proportionally to sales revenue throughout the remaining quarters.

8. How does EPACK Durable view the long-term growth potential of the AC market in India?

Despite a surge in demand attributed to heat waves, EPACK believes the long-term growth potential of the AC market remains strong due to India's low penetration rate of 8% compared to the global average of 42%. The company anticipates the market to double in size over the next 4-5 years and reach 40 million units by 2029, fueled by rising disposable incomes and government initiatives.

Source: Link to Earning Call Transcripts

Disclaimer

Content Accuracy and Reliability: This summary of the earnings call is generated using an artificial intelligence large language model (LLM). While every effort has been made to ensure the accuracy and completeness of the information, the summary may not fully capture all nuances or details of the original earnings call. The content provided is for informational purposes only and should not be construed as financial advice or a recommendation to buy or sell any securities.

Verification: Readers are encouraged to refer to the official earnings call transcript, company filings, and other authoritative sources for comprehensive and accurate information. The creators of this summary do not guarantee the accuracy, completeness, or timeliness of the information and accept no responsibility for any errors or omissions.

No Liability: The use of this summary is at your own risk. The creators and distributors of this content disclaim any liability for any loss or damage arising from the use of or reliance on this summary.

Consult Professional Advice: For investment decisions or financial advice, please consult a qualified financial advisor or other professional.