Buy PG Electroplast Ltd For Target Rs. 623 By Geojit Financial Services Ltd
Monsoon impact weigh on Q1; Expect a recovery in H2FY26
PG Electroplast Ltd (PGEL), the flagship entity of PG Group is a leading electronic manufacturing service provider in India, having a diverse portfolio and panIndia presence.
• In Q1FY26, PGEL reported a revenue growth of ~14% YoY, which is in line with our estimates. However, air conditioner sales faced significant headwinds due to the early onset of the monsoon, which disrupted the seasonal volumes.
• EBITDA margin declined by 183bps YoY to 8.1% due to negative operating leverage and input cost pressure. The company expects FY26 margin to decline by 1.25-1.5% YoY due to pricing pressure and higher channel inventory.
• PGEL expects inventory to be cleared in H2FY26 as the seasonal demand picks up. • Washing machine sales were robust during the quarter, reported a growth of 36% YoY. PGEL expects the segment to grow 40-45% YoY in FY26.
• We expect the management’s focus to diversify to other business verticals like refrigerator, EV and compressor manufacturing to keep the longterm story intact.
Outlook & Valuations
We expect the long-term outlook to remain intact, and the current underperformance in stock prices is due to a temporary headwind owing to an abrupt end of the RAC season. The stock is currently trading at its 3-year average 1-year forward P/E of 42x, and we expect most of the negatives are factored into the price. We therefore revise our rating to BUY with a downwardly revised TP of Rs 623, based on a P/E of 40x on FY27E EPS.
Key Concall Highlights
• The company reduced FY26 revenue estimates to 17-19% YoY from 30% earlier and PAT estimates to 3-7% YoY from 39% earlier due to a sudden demand drop in Q1FY26.
• The company expects EBITDA margins to decline by 1.25-1.5% compared to last year.
• The company is carrying ~Rs1,300cr of inventory in Q1FY26, with ~Rs.1,200cr in the RAC business alone due to significant order cancellations of 50-70% in June-August.
• Management expects inventory to be cleared by December-January due to a pickup in demand.
• The company reduced their FY26 capex guidance to Rs.700-750cr from the earlier planned Rs.800-900cr.
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