Pearl Global Industries Limited

Pearl Global Industries Limited reported a robust performance for Q2 and H1 FY26. Consolidated revenue for H1 FY26 stood at INR 2,541 crores, marking a 12.7% year-on-year growth. Adjusted EBITDA, excluding ESOP expenses, grew 18.4% year-on-year to INR 236 crores, achieving a margin of 9.3%. Consolidated PAT for H1 FY26 was INR 138 crores, a 17% increase year-on-year. The company also saw its ROCE improve significantly by 375 bps to 29% in H1 FY26 from 25.2% in H1 FY25, and working capital days stood at 33 days.

The company's strategy of geographical diversity has been effective, with a notable footprint across Australia, Japan, U.K., and EU, in addition to the U.S. This diversification has led to a reduction in U.S. market exposure from over 60% last year to below 50% currently, mitigating risks associated with tariffs. Management is actively broadening its client base for India into Japan, Australia, and the U.K., supported by favorable trade agreements and growing retailer interest. The India-EU FTA negotiation is expected to finalize by year-end, potentially providing a strong uplift for Indian garment exports.

Tariffs, particularly the 25% penalty on goods from India to the U.S., continue to impact the company's margins. To mitigate this, customers often request a 14-15% discount on the FOB value. While some sizable customers do not receive discounts, others do based on negotiations. This situation has led the company to less aggressively pursue U.S. market business from India, preferring to shift production to other countries like Vietnam and Indonesia where tariff advantages exist, thereby improving the bottom line.

Pearl Global is firmly on track with its capex plan, targeting an additional capacity of 5-6 million pieces. A committed outlay of INR 250 crores for FY26 has seen INR 134 crores already utilized. Construction of the Bangladesh apparel manufacturing unit (INR 110 crores allocated, INR 65 crores committed) and a laundry facility (INR 90 crores allocated, INR 33 crores committed) is underway, both targeted for completion by Q2 FY27. The India Bihar capacity expansion (INR 20 crores allocated) is fully completed and in the process of commercialization. The company expects total installed capacity to exceed 100 million pieces by mid-FY27 and reach approximately 110 million by end of FY27, with a long-term endeavor for 130-135 million pieces by FY28.

The company has upgraded to eFlow Nanobubble technology for washing in Bangladesh, leading to significant environmental benefits. This advancement enables up to 32% water saving, 9% reduction in power consumption, and a 20% improvement in time efficiency. Additionally, with solar projects installed in India, renewable energy consumption has substantially increased to 35% of total energy consumption, demonstrating a commitment to sustainable manufacturing practices.

Pearl Global has a roadmap to achieve INR 6,000 crores in revenue by 2028. Despite current macro challenges^🌐 and tariff impact^🌐s, management is confident in maintaining the overall margin profile similar to last year, with efforts to improve. The company's long-term aspiration is to achieve a 12% EBITDA margin. The improved product mix and higher realization from Vietnam and Indonesia have contributed positively to revenue growth, and this trend is expected to be sustainable.