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Strengthening its core and flexing its diversification muscle

PG Electroplast posted a strong 4Q, led by robust growth in its products business. Its products business has more than doubled in FY25, owing to strong growth across product lines (RACs, washing machines, air coolers), thereby strengthening its market position in its core segment. The management also announced an investment of INR 3bn in a refrigeration unit in South India, which is expected to commence operations in FY27, thereby continuing its efforts to expand its product portfolio beyond ACs. Its FY25 revenue and PAT came in at INR 48.7bn and INR 2.9bn vs. guidance of INR 45.5bn and INR 2.8bn respectively. For FY26E, the management has guided for 30/40% YoY growth in revenue/PAT, with its products business expected to grow 35%. Our estimates suggest a FY25-28E EPS CAGR of 38% with average RoEs of 16%. Maintain BUY with a revised target price of INR 960 (INR 950 earlier) at 47x Mar’27E EPS.

* 4QFY25 a beat on JM and Street estimates: Revenue at INR 19bn, +77% YoY, was 21% ahead of JMFL and consensus estimate of INR 15.8bn; it has nearly doubled on a sequential basis. EBITDA at INR 2.1bn, +82% YoY, and EBITDA margin of 11.1% too were ahead of JMFL (INR 1.7bn, 10.7%) and consensus (INR 1.7bn, 10.8%) estimates. EBITDA margin improvement was primarily owing to operating leverage, while gross margin was flat YoY and in line with consensus. 4Q PAT stood at INR 1.45bn, +109% YoY vs. JM and consensus estimate of INR 1.15bn and INR 1.17bn respectively.

* Exciting FY26 outlook after a strong FY25: The management’s FY26E revenue guidance stood at INR 63.5bn, +30% YoY. This includes a growth of 35% YoY for the product business, which is expected to ramp up to INR 47.8bn vs. INR 35.3bn in FY25. PAT guidance for FY26E stood at INR 4bn, +39% YoY. The management believes that an annual growth of 30-35% is achievable over the next 3 years. It also highlighted that current EBITDA margin levels are sustainable, and it expects these levels to continue in FY26 as well, with minor operating leverage-led benefits. It also announced its target of doubling its gross block to INR 22bn from ~INR 12bn over the next 2 years, of which INR 8-9bn will be incurred in FY26. These 2-year capex plans will include expanding existing RAC and washing machine capacities and an investment of INR 3bn in a refrigerator manufacturing plant, revenue from which is expected to start coming in from FY27.

* Compressor initiatives slightly delayed, but clearly on the cards yet: Compressor availability, which appeared to be an issue until 2-3 weeks ago, now seems to be manageable. For the compressor unit, construction of the building has already started, while plant and machinery is being finalised. Progress has also been made on the agreement with the technology partner and finalisation of the same is expected soon. Most of the capacities will be used for in-house consumption. The management’s target for commencement of this facility is 4QFY26.

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SEBI Registration Number is INM000010361