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Strong growth; margins hurt by higher expenses

Pearl Global (PGIL) reported strong revenue growth of 37.2% YoY to INR18b in 2QFY27, led by realization growth of 20% while volumes grew 15%. EBITDA grew 41% YoY to INR1.7b, while EBITDA margin declined 25bp YoY to 9.5%, primarily due to higher operating expenses. Gross margin expanded 340bp YoY to 48.2%. The company continues to benefit from strong order execution and capacity utilization, with further growth expected to be supported by capacity expansion across key geographies. We expect PGIL to deliver healthy revenue growth, supported by volume growth and capacity additions, while improving operating leverage and product mix should support margin expansion over the medium term. We expect revenue to clock a 21% CAGR over FY26-28. The Board has declared an interim dividend of INR5 per equity share.

Strong revenue growth driven by volumes and realizations

PGIL’s revenue grew 37.2% YoY to INR18b in 2QFY27, driven by volume growth of 14.6% to 22.8m pieces and realization growth of 19.8% to INR790 per piece. Capacity utilization improved to 90% from 84% in 2QFY26 and 83% in 1QFY27. Growth was supported by healthy order execution across geographies and product categories, alongside sustained momentum from existing and newly onboarded customers. Recently acquired customer programs continued to scale up, contributing to revenue growth and enhancing visibility for future expansion. With ongoing capacity additions across geographies, backward integration into knitting and dyeing, and the ramp-up of operations in Indonesia, Vietnam and Guatemala, we expect PGIL to sustain healthy revenue growth.

Margin expansion supported by favorable product mix

Gross margin expanded 340bp YoY to 48.2%, supported by a favorable product mix. EBITDA grew 41% YoY to INR1.7b, with EBITDA margin improving 25bp YoY to 9.5%, adjusted for one-time net tariff gains and a contribution from value-added services amounting to ~INR115m. Employee expenses grew 22% YoY, while other expenses increased 72% YoY to INR4.0b. PAT grew 58% YoY to INR1.2b, supported by higher operating profitability. PGIL plans to invest INR6.75-7.25b over FY27-30 towards capacity expansion and backward integration into knitting and dyeing, targeting revenue of INR90-100b by FY30. We expect EBITDA margins to improve to 11.2% by FY28, supported by operating leverage, higher capacity utilization and operational efficiencies.

Valuation and view: Reiterate BUY

We expect PGIL’s growth to be driven by ongoing capex additions across geographies, along with backward integration into knitting and dyeing, backed by strong top-five customer relationships. We expect a revenue, EBITDA and PAT CAGR of 21%, 34%, and 40%, respectively, over FY26-28, fueled by these capacity expansions. PGIL’s asset-light model supports strong return ratios, positioning the company for a gradual recovery in earnings quality. We reiterate our BUY rating with a revised TP of INR1,550, valuing the stock at 18x FY28E EV/EBITDA. Key risks include tariff and US exposure risk, raw material and cost pressures, and project and customer concentration risk

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