Buy Pearl Global Ltd for the Target Rs 1,500 by Motilal Oswal Financial Services Ltd
Capacity expansion drives growth across geographies
Pearl Global’s (PGIL) analyst meet reinforces a structurally stronger mid-to-high teens growth framework (16–18%), with management targeting ~15% volume growth and ~300bp margin expansion (12-14% EBITDA margin), driven by operating leverage and a higher contribution from knit products.
* Revenue growth: Management reiterated its FY28 revenue target of INR60b, which is expected to be achieved well ahead of schedule, and targets INR90- 100b revenue by FY30, implying a 16-18% CAGR from FY26.
* Capacity expansion: The current capacity of ~108m pieces is targeted to increase to 120-140m pieces by FY28 and 170-175m pieces by FY30, with utilization targeted at ~80%.
* Capex: The company plans a total of INR6.75-7.25b capex through FY30, of which INR3.25-3.50b is earmarked for capacity expansion and INR3.5-3.75b for investments in knitting and dying. Knits are targeted to increase from ~26% to ~35% of capacity, while washing outsourcing is expected to decline from ~60% to 20-25%, supporting margin expansion.
* Margins and returns: Management targets 12-14% EBITDA margins and 22- 25% RoCE, with higher-value products, backward integration, and operating leverage expected to support profitability as capacity scales.
FY28 target ahead of schedule; aims to reach INR90-100b by FY30
Management reiterated its FY28 revenue target of INR60b, indicating that the target is expected to be achieved well ahead of schedule. The company currently operates with capacity of ~108m pieces and plans to expand this to 120-140m pieces by FY28 and 170-175m pieces by FY30, with utilization targeted at ~80%. Management has given a revenue target of INR90-100b for FY30, implying a 16- 18% revenue CAGR over FY26-FY30 and a 12-14% EBITDA margin. Growth is expected to be driven not only by capacity addition but also through an increase in wallet share from existing customers, a broader product portfolio, and greater contribution from higher-value categories. Management plans to focus on scaling high-growth customer relationships, with the top six high-growth customers targeted to contribute 50-55% of revenue by FY30 and the next 15 customers another 35-40%.
Capacity additions planned across geographies
PGIL continues to diversify its manufacturing footprint across India, Indonesia, Bangladesh, Vietnam, and Guatemala. In India, expansion is increasingly moving toward Tier-2/3 locations such as Bihar. Management also views Bihar, Orissa, West Bengal, and Jharkhand as attractive locations for expansion due to availability of labor. In Vietnam, ~7m additional pieces are expected to be added to the recently acquired land parcel. PGIL is adding a new facility in Demak, Indonesia, including a new product category. The Guatemala operation is currently focused on stabilization and breakeven, with Central America viewed as strategically relevant for supply chain diversification.
Product diversification and higher-value categories to support growth
The company is expanding beyond its traditional focus on women's woven apparel into men's trousers, knitwear, and higher-value categories such as blazers and dress pants. The increase in knit revenue to ~35% should provide access to a larger global opportunity, where China and Vietnam currently account for a much higher market share than India. Higher-value categories and greater vertical integration into fabric and washing should also support improvement in product mix and margins.
Backward integration to expand margins and improve the supply chain
PGIL is increasing its focus on backward integration, with INR3.5-3.75b earmarked for knitting and dying. Management highlighted significant customer interest in knitwear and expects in-house fabric capabilities to expand margins, shorten lead times, and reduce dependence on external fabric suppliers. Knits currently account for ~26% of capacity and are targeted to increase to ~35%, providing an additional growth avenue given India's relatively low participation in global knitwear compared with China and Vietnam. Washing represents another margin expansion opportunity: ~60% of washing is currently outsourced, which management intends to reduce to 20-25% through laundry facilities in Bangladesh. Management estimates that the shift could expand margins by ~40bp on INR60b revenue.
Financial outlook
The company is expected to post revenue, EBITDA, and PAT CAGR of 17%, 32%, and 38%, respectively, over FY26-28. Management expects 16-18% revenue growth over FY26-30, while EBITDA margin is expected to expand to 12-14%. Management remains focused on maintaining returns while funding the expansion. The FY30 capex of INR6.75-7.25b is expected to be funded through internal accruals and debt while retaining the asset-light partnership model. Management aims to maintain 22-25% RoCE and a strong/net cash balance sheet, while retaining flexibility for selective inorganic opportunities.
Valuation and view: Reiterate BUY
We expect PGIL’s growth to be driven by capacity additions across geographies, backward integration, and expansion in product categories. Its asset-light model supports strong return ratios, positioning the company for a gradual recovery in earnings quality. We have raised our earnings estimates and reiterate our BUY rating with a revised TP of INR1,500, valuing the stock at 18x FY28E EV/EBITDA (earlier TP INR1,360). Key risks: tariff and US exposure risk, raw material and cost pressures, and project and customer concentration risk (refer to our IC note dated Jun’26).
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