PG Electroplast Q4 FY26 earnings call

PG Electroplast reported a challenging Q4 FY26 with consolidated revenues declining 10.1% Y-o-Y to ₹1,717 crores. EBITDA for the quarter was ₹131.5 crores, down from ₹231.72 crores last year, and net profit fell 56% to ₹64.2 crores. For the full year FY26, consolidated revenues grew to ₹5,288 crores from ₹4,869 crores in FY25, but EBITDA decreased to ₹441.76 crores from ₹519.16 crores, and PAT stood at ₹193.61 crores compared to ₹290.92 crores in FY25. The decline in profitability was attributed to margin compression from input cost inflation, negative operating leverage, and elevated finance costs.

The RAC industry, a major contributor, experienced a 15% decline in FY26 due to demand shocks like an early monsoon, GST rate cut announcements, and BEE rating transition. Supply-side challenges included significant cost inflation in commodities (copper, aluminum, plastics) and a 20% Y-o-Y depreciation of the Indian rupee, which inflated input costs. Q4 was further impacted by an estimated ₹300 crores production loss from a 2-week plant shutdown due to an LPG shortage and a ₹120 crores sales loss from truck shortages, leading to stranded finished goods.

Despite the challenging environment, PG Electroplast is advancing strategic initiatives. A new refrigerant manufacturing facility in Sri City is planned for commercial production by Q4 FY27, expected to be a meaningful revenue stream in FY28. A rotary compressor manufacturing facility at the Supa plant is also underway, with operations commencing by Q4 FY27, aiming for a 2 million compressor capacity in phase one. The expanded washing machine facility in Greater Noida is now operational, and the company is consolidating molding facilities at Salarpur to enhance operational performance and achieve economies of scale.

Working capital was stressed throughout FY26 due to higher inventory levels and delayed collections from customers. This led to increased borrowing utilization and higher interest costs. Gross margins were impacted by approximately 250 basis points in Q4 due to commodity inflation and currency depreciation, which the company was unable to fully pass on. While price increases were attempted in April, the dynamic nature of rupee depreciation and commodity price increases continue to pose challenges to margin recovery.

Management is optimistic for FY27, expecting channel inventory to normalize significantly by June end, with April and May showing better sell-out momentum. They anticipate better than industry revenue growth and an improvement in EBITDA margins towards 8%. The washing machine business is projected to grow upwards of 30-35% in FY27. The company also expects to receive and recognize ₹71 crores in PLI for FY26 during FY27. The long-term structural drivers for the consumer durables sector, such as rising temperatures, urbanization, and the outsourcing trend, remain intact.

Total capital expenditure for FY26 was approximately ₹800 crores. This included around ₹500 crores for land and building across new campuses for washing machines (Greater Noida), refrigerators (Sri City), compressor building (NGM Supa), and additional land (Kamargaon). An additional ₹70 crores was spent on washing machine plant and machinery, ₹165 crores on RAC plant and machinery, ₹35 crores on molding and electronics, and ₹10 crores as an advance for refrigerator plant and machinery. For FY27, the company plans a capex of close to ₹400 crores, aiming for an asset turn of 4x plus by 2029.