Buy GNG Electronics Ltd for the Target Rs 725 by Emkay Global Financial Services Ltd
GNG Electronics (GNG) delivered a robust 1Q, with consolidated revenue up 32% yoy (vs 34% in FY26) to Rs4.1bn, driven by 18% yoy volume growth (vs 23% in FY26) and 12% yoy increase in blended ASP (vs 9% in FY26). Management upgraded its FY27 revenue growth guidance to 30% (vs 25% earlier) and now expects PAT margin expansion of 75-100bps (vs 50bps guided earlier). Management reiterated GNG’s strong competitive moat, anchored in its ‘Buy Better, Refurbish Better, Sell Better’ strategy, enabling the company to offer better products, better pricing, and better warranties (up to 3Y), while continuing to focus on the high-realization B2B segment. Management expects the refurbished IT Devices market to grow 4-5x over coming years, driven by a large underpenetrated addressable market and rising acceptance of refurbished devices. GNG believes its "new-like" products, diversified geographic presence (US/Europe/ME contributing 24%/23%/12% of revenue), limited organized competition, and significant pricing headroom (~30% of new devices vs ~50% typically seen in refurbished smartphones and used cars) position it well to capitalize on this opportunity. It also expects working capital to remain broadly in line with that in FY26, viewing higher inventory as a strategic lever to support scale, improve product availability, and enhance gross margin (GM) expansion. We retain FY26-29E revenue/EBITDA/EPS CAGR of ~24/30/37%; maintain BUY (Moat in ESGaligned refurbished market; initiate with BUY) and DCF-based TP of Rs725 (implying ~30% upside and 29x Jun-28E PER)
Strong growth across parameters; margin expansion the key highlight
GNG clocked a strong quarter, with consolidated revenue up 32% yoy (vs 34% in FY26) to Rs4.1bn. Consolidated EBITDA grew 53% yoy (vs 68% in FY26) to Rs494mn, while EBITDAM expanded by 225bps qoq at 12%, led by GM improvement of 540 bps, which was partly offset by higher-than-expected employee costs/other expenses. PAT increased 56% yoy (vs 91% in FY26) to Rs289mn with net margin of 7%. On standalone basis, revenue/EBITDA grew 39%/47% yoy (vs 29%/58% in FY26), with EBITDAM improving by 358bps qoq to 12.1%.
Earnings call KTAs
1) Management upgraded its FY26 revenue guidance to 30% (vs 25% earlier), followed by PATM expansion of 75-100 bps (vs 50bos guided earlier).
2) Management reiterated GNG’s strong competitive moat, anchored in its ‘Buy Better, Refurbish Better, Sell Better’ strategy, enabling the company to offer better products, better pricing, and better warranties (up to 3Y).
3) B2B remains GNG's strategic focus, driven by better realizations, with B2C expansion not being pursued in the near term given its investment-intensive nature.
4) Management sees the refurbished IT Devices market growing 4-5x over coming years, driven by a large underpenetrated market and rising acceptance of refurbished devices.
5) GNG believes its geographic diversification (US/Europe: 24/23% of revenue), limited organized competition, and significant pricing headroom provide a strong runway for growth.
6) Component cost inflation remains a tailwind, with higher DDR5 RAM prices (5-10% increase this quarter) supporting laptop ASPs, and gross margins; Management expects no meaningful price correction before the end of FY27.
7) Working capital is expected to be broadly stable vs FY26, viewing higher inventory as a strategic lever to support growth, improve product availability, and drive GM expansion.
8) Structural industry tailwinds remain intact, with IDC forecasting ~11% drop in global PC shipments in CY26, thus accelerating demand for refurbished devices.
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