Not Rated Pearl Global Industries Ltd for the Target NA by Emkay Global Financial Services Ltd
We hosted the senior management of Pearl Global Industries (PGIL) for a roadshow in Mumbai. KTAs:
1) With steep tariffs on India now behind and brent crude back to pre-war levels, PGIL is confident of surpassing its Rs60bn revenue target by FY28; the management reiterated its medium-term revenue CAGR guidance of 12-14%, to be mainly led by volume.
2) Demand scenarios in the key markets of US, EU, UK, etc are stable, with a positive outlook.
3) FTAs with EU/UK position India to capture market share from Bangladesh/Vietnam; India has commenced marketing efforts and the compliance process for these geographies.
4) PGIL targets ~10% operational EBITDA margin in FY27 and aspires to attain 12% over the medium term through
i) Better product mix
ii) Achieving break-even levels at Bihar and Guatemala operations along with profitable operations at its Indonesia facility, in FY27
iii) Operating leverage benefits at India operations
iv) Lower burden sharing of US tariffs.
5) FY27 capex guidance is Rs2-2.5bn (self-funded via internal accruals, which should help PGIL achieve capacity of >125mn pieces by FY28. At CMP, PGIL trades at ~21x FY28 PER (Bloomberg estimate). PGIL is ‘Not Rated’.
Diversified footprint and India’s post-tariff recovery to drive growth
The mgmt sounded confident of surpassing its target of Rs60bn by FY28 despite a turbulent FY26. PGIL reiterated its medium-term revenue CAGR guidance of 12-14% driven by ramp-up in India operations, which have been the key drag in FY26 due to punitive US tariffs. With eight owned factories, including the Bihar facility, India has installed capacity capable of supporting revenue well above Rs16bn (vs ~Rs11bn in FY26), with existing EU/UK brands keen to raise sourcing from India (diversifying from Bangladesh/Cambodia). PGIL also expects to outgrow customers' 7-8% organic growth via wallet-share gains, aided by its multi-country, multi-category model
Mid-term EBITDA margin target at 12%
PGIL targets ~10% operational EBITDA margin in FY27 (vs 9.3% reported/10.3% adjusted for Rs360mn tariff cost and ~Rs130mn of Bihar/Guatemala startup losses in FY26), and aspires to achieve 12% over the medium term. Key levers: i) normalization of the tariff drag (Rs360mn in FY26); ii) Guatemala reaching breakeven in FY27 and Bihar ramp-up costs tapering; iii) efficiency improvement measures in Bangladesh through a sustainable-laundry facility (Rs900mn capex, ~18-20% RoCE), and iv) operating leverage in India as revenue fills toward Rs15-16bn (India standalone EBITDA margin was 6.2% in FY26).
Well poised to manufacture >125mn pieces with disciplined balance sheet
The management guided to FY27 capex of Rs2-2.5bn, spread across Bangladesh (garmenting + laundry), a new greenfield unit in Vietnam, Bihar, and routine maintenance/efficiency. This will expand installed capacity from 101mn pieces (FY26) to 125-130mn by FY28, viz sufficient to ship ~100mn pieces. Factoring in the lease liability, net debt/EBITDA stood at a comfortable ~0.4x in FY26.
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