Detailed Narrative
Q3 FY25 Performance Overview
Epack Durable reported a strong Q3 FY25 with revenue from operations at INR 377 crores, marking a 35% year-on-year increase. EBITDA stood at INR 24 crores, growing by 1.3% YoY, with an EBITDA margin of 6.37%. Net profit for the quarter was approximately INR 2.5 crores. For the nine months ended December 31, 2024, revenue reached INR 1,528 crores (up 71% YoY), EBITDA was INR 86 crores (up 41% YoY) with a 5.60% margin, and net profit surged 132% YoY to INR 17 crores, achieving a PAT margin of 1.14%.
Sri City Plant Ramp-up and Margin Impact
The new Sri City facility, operational since January 2024, is currently utilized at 15%-20% of its capacity, which has contributed to lower EBITDA growth on a year-on-year basis due to higher associated costs. Management expects the plant to reach a normalized capacity utilization of around 50% by the end of calendar year 2025. Client validation and approval processes for the new facility caused initial delays, but these are now largely resolved, and utilization is expected to improve significantly in Q4 FY25 and subsequent quarters.
Product Diversification and New Launches
The company's diversification strategy is gaining traction, with product business contributing 98% of total revenue in Q3 FY25. While Room AC remains a core segment, contributing 66% of revenue (up 37% YoY), the overall dependence on RAC has reduced. Epack Durable is targeting to start Hisense AC production at its new Sri City subsidiary around Q3 FY26 (August-September 2025). Mass production for washing machines is slated for Q1 FY26, with a ramp-up to 100,000 units per month (1 million annualized) in FY26. Production of air fryers is expected to commence by mid-March 2025, further expanding the small appliance portfolio.
Supply Chain and Raw Material Outlook
The company faced supply chain disruption🌐s in Q3 FY25, particularly concerning copper availability due to issues with BIS approvals for Chinese manufacturers. While this has impacted the industry, BIS approvals for some foreign suppliers are now granted, which is expected to normalize📎 copper supply in the short term. Regarding compressors, management anticipates sufficient domestic capacity development within the next 12-18 months, with no plans for Epack Durable to manufacture compressors in the next 3-4 years.
Financial Outlook and Capital Allocation
Epack Durable maintains its FY25 revenue guidance of INR 2,150 crores plus, with an EBITDA margin target of 7.25%-7.5%. The company aims to improve its ROE/ROCE to 15%-16% by FY27-28 onwards, driven by better capacity utilization and product mix. Working capital requirements are projected to be around INR 350-360 crores for Q4 FY25, with no fresh debt required for capex. The gross block currently stands at INR 850 crores, and the asset turnover ratio is expected to improve from 2.5-2.75 to 3.5-4x in the next 2-3 years.
Component Business and Exports Growth
The component business is a growing segment, contributing almost 6% to total revenue in 9M FY25 and 14% in Q3 FY25. The company targets INR 190-200 crores in component revenue for the current financial year and expects its contribution to rise to 12%-15% in the medium term (next 2-3 years). Exports have also seen significant growth, now accounting for 4% of total AC revenue in 9M FY25, up from 1%-2% previously, with expectations for continued strong growth in the next 3-4 years due to cost leadership.