PG Electroplast: Q2-25 Earnings Call Highlights
Strong growth momentum. Robust order book. Successful capacity expansion initiatives. Focus on product business growth, capital efficiency, & expansion into new product categories and export markets
pgel.in | NSE: PGEL
1. Key Takeaways
1.1 TLDR
The Q2 FY25 earnings call projected a positive outlook for PG Electroplast, highlighting strong growth momentum, robust order book, and successful capacity expansion initiatives.
The management's focus on product business growth, capital efficiency, and strategic expansion into new product categories and export markets indicates a strong roadmap for future success.
While challenges remain, particularly around supply chain complexities, the company appears well-positioned to navigate these and deliver on its ambitious growth targets
1.2 Operational Highlights:
Q2 FY25 Performance:
Operating revenue: Rs. 670 crore (46% YoY growth)
Product business revenue: 54% of total revenue
EBITDA: Rs. 60.5 crore (55% YoY growth)
Net profit: Rs. 19.5 crore (57% YoY growth)
H1 FY25 Performance:
Operating revenue: Rs. 1,992 crore (75% YoY growth)
Product business revenue: Rs. 1,355 crore (119% YoY growth)
EBITDA: Rs. 195 crore (80.7% YoY growth)
Net profit: Rs. 104.4 crore (126% YoY growth)
Segmental Growth (Q2 FY25 YoY):
Room ACs: 212%
Washing machines: 23%
Air coolers: 191%
Electronics (ex-TV): 700%
Segmental Revenue (Q2 FY25):
Plastic molding: Rs. 229 crore
Electronics: Rs. 80 crore
PLI: No incentives booked in Q2 FY25.
Expected PLI for FY25: Rs. 30 crore.
Expected PLI for FY26: Rs. 37.5 crore.
CAPEX: Total: Rs. 370-380 crore
Product business expansion: Rs. 165 crore
Land and building acquisition: Rs. 185 crore
Maintenance & other: Rs. 20 crore
Funding: Considering raising up to Rs. 1,500 crore through QIP to fund organic growth opportunities.
Margins: Expected to remain stable in the coming years, with focus on per unit margin in absolute terms.
Competition: Competitive intensity remains high, especially in the AC business, with supply chain management becoming a key differentiator.
Exports: Actively exploring export opportunities, with initial focus on Middle East and African markets for ACs.
1.3 Key Themes:
Strong Q2 FY25 Performance: PG Electroplast reported robust growth in Q2 FY25, with a 46% YoY increase in operating revenue to Rs. 670 crore. Product business revenue grew 54%, driven by strong performance in room ACs (143% growth), washing machines (41% growth), and air coolers (267% growth).
Revised FY25 Guidance: Driven by strong order book and visibility, the company revised its FY25 guidance upwards. Operating revenue is expected to reach at least Rs. 4,850 crore (77% YoY growth), including Rs. 600 crore from its JV Goodworth Electronics. Net profit guidance is revised to at least Rs. 250 crore, an 83% YoY increase.
Focus on Product Business Growth: The company continues to prioritise its product business, aiming to achieve 78% YoY growth in this segment, reaching Rs. 2,975 crore in FY25.
Capacity Expansion: PG Electroplast is on track to meet its CAPEX guidance of Rs. 370-380 crore for FY25, with investments focused on expanding capacity in product businesses and infrastructure development.
Capital Efficiency: The management emphasised their commitment to improving capital efficiency by sweating assets and achieving industry-leading growth with best-in-class return ratios.
1.4 Key Quotes
On IT Hardware PLI scheme: "The government is still trying to figure out how to restrict the import of IT hardware products into the country. Once that is aligned and in place, then we should see some kind of traction for moving of manufacturing from overseas locations to India."
On TV business growth: "We are seeing a very strong momentum... We are confident of maintaining that momentum going forward as well in FY26 as well."
On revised FY25 guidance: "The order book is very, very strong, and based on that order book only, we have been able to revise our guidance upwards."
On capital efficiency: "Improving capital efficiency by sweating our existing and new assets will be the key focus area of the company in the coming years."
On margin outlook: "Margin should be in the similar range as they are today... it is the per unit margin in absolute amount that we actually get. And that is what we look into when we are doing the business and that remains the key focus."
On new product categories: "We are in the evaluation phrase itself. As and when we decide to go ahead, we will make an announcement."
On supply chain challenges: "The government of India of late has been actually putting quality control orders, basically making the BIS certification mandatory for component factories also... And that is leading to some supply chain challenges this year and is likely to actually aggravate further next year."
PG Electroplast Limited Q2 FY25 Earnings Call FAQ
What were the key highlights of PG Electroplast's Q2 FY25 performance?
PG Electroplast experienced robust growth in Q2 FY25, with a 46% increase in operating revenue, reaching Rs. 670 crore. The product business, encompassing room ACs, washing machines, and air coolers, contributed 54% of this revenue. Profitability also surged, with EBITDA rising by 55% to Rs. 60.5 crore and net profit increasing by 57% to Rs. 19.5 crore.
What is the growth outlook for PG Electroplast's product business?
The company anticipates substantial growth in its product business, driven by strong order books and new product launches. PG Electroplast has revised its FY25 revenue guidance to at least Rs. 4250 crore, with an additional Rs. 600 crore expected from its JV, Goodworth Electronics. This translates to an overall revenue growth of around 77%. The product business alone is projected to grow by approximately 78%, reaching Rs. 2975 crore.
How is PG Electroplast addressing supply chain challenges in the AC business?
The management acknowledged that supply chain constraints, particularly concerning critical components, are escalating in the AC industry. To mitigate these challenges, PG Electroplast has proactively secured supplies for all essential components until March, ensuring the fulfillment of its guidance. However, the company anticipates that supply chain management will be a crucial factor influencing growth in the coming quarters.
What are PG Electroplast's plans for capital expenditure (CAPEX)?
PG Electroplast has allocated a CAPEX budget of Rs. 370-380 crore for FY25. Approximately Rs. 165 crore will be invested in expanding production capacity for the product business, while Rs. 185 crore will be dedicated to land acquisition and building infrastructure. The remaining funds will cover maintenance CAPEX and investments in the plastic components segment.
What is the status of PG Electroplast's entry into the IT hardware segment?
While PG Electroplast has plans to participate in the IT hardware sector, particularly laptop manufacturing, progress has been hindered by the lack of clear government regulations on IT hardware imports. The company is actively engaging with the government to advocate for policies that promote local manufacturing.
What is the company's strategy for managing fluctuating commodity prices?
PG Electroplast's revenue model incorporates a pass-through mechanism for commodity prices. The bill of materials is adjusted based on commodity price fluctuations, typically on a monthly or quarterly basis. This strategy allows the company to maintain consistent conversion costs or making charges for its products, minimizing the impact of commodity price volatility on margins.
How will the funds raised through the recent QIP be utilized?
PG Electroplast has secured board and shareholder approval for a QIP of up to Rs. 1500 crore. The proceeds will primarily fuel organic growth opportunities, including capacity expansion and working capital requirements, as the company continues to experience strong demand in its core business segments.
What is PG Electroplast's outlook on profitability and margin trends?
The company has revised its net profit guidance to at least Rs. 250 crore for FY25, representing an 83% growth over FY24. This includes an estimated Rs. 30 crore contribution from the Production Linked Incentive (PLI) scheme. PG Electroplast anticipates maintaining stable operating margins in absolute terms, focusing on per-unit profitability rather than percentage margins.
Source: Link to Earning Call Transcript
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