PGEL — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

Moderator · Conference Operator

MR. GAURAV UTTRANI – JM FINANCIAL INSTITUTIONAL

SECURITIES LIMITED · Management

PG Electroplast Limited May 29, 2023

crores. · Product business has crossed INR1,300 crores in FY ‘23 with room AC business contributing

Product business has crossed INR1,300 crores in FY ‘23 with room AC business contributing INR141 crores with a 180% growth on a Y-o-Y basis.

And the washing machine business has also grown at around 57% on a Y-o-Y and coolers grew at 169%.

Order book for product business remains very robust and the company is on track to scale the product business significantly in FY ‘24.

PG's new products offerings in washing machines and room ACs have been very well received by our clients.

The company is focusing its efforts towards developing products that helps it maintain its cost leadership while striving for product leadership too.

Companies continue to see increased interest for business from new and existing clients and we remain confident on the future growth prospects of our business.

PG Electroplast Limited May 29, 2023 For FY ’24, our sales guidance stands at, at least INR2,800 crores, which is a growth of around 30% over FY ‘23 and operating profit guidance of at least INR210 crores which is a growth of around 28% over FY ‘23 operating profit of INR164 crores.

Our growth in product business that is washing machines, room air conditioners and air coolers is expected to be around 43% and we hope to scale up this business from INR1,341 crores to around INR1,920 crores in FY ‘24.

Capex guidance for FY ‘24 is around INR170 crores to INR180 crores and company has further -- company is further planning to expand its room AC capacity by setting up a new integrated unit in Rajasthan for making room ACs and we are at the same time building a new building in a super factory and we are doubling our PCB assembly capacities for our AC controls in super.

With this now, I will hand over the call to my colleague Mr. Pramod Gupta, our CFO who will elaborate on the financials.

Pramod Gupta

Hello, good afternoon everyone.

I am sure you have all seen the financials in detail already.

I will just touch upon some of the highlights.

We had a very good scale up during FY ‘24 from operations point of view.

The net sales for the quarter 4 was 65% up at INR827 crores, operating profit grew 106% in the fourth quarter to INR74.42 crores and net profit rose 45% to INR40.2 crores.

During the fourth quarter and FY ‘23 operating margins improved due to cost control, lower commodity prices and operating leverage.

On balance sheet, we have had an increase of about INR158 crores of debt in the last 12 months that is largely because of the working capital and capex that has been funded by the new debt.

We know we have seen slightly higher debt than what we budgeted due to the sharp revision in the business execution and higher sales leading to higher working capital during the year.

But I want to highlight here that we are aiming at delivering industry leading growth with best in class return ratios in coming years and our new partnerships which you would have seen today we have announced a new partnership for TV also.

We aim to be a significant leader in the consumer electronic industry as well.

Now with this I will open the floor for Q&A.

Thank you.

Dhananjai Bagrodia: · So right now, was it not available or was the cost essential quite a bit?

Sure.

So just to have an idea, just how much of our production is now in-house versus imported and imported and outsourced and between outsourced also how much is imported versus India?

So right now, was it not available or was the cost essential quite a bit?

Okay, sure.

And any target in terms of capex, what we see for next year?

Perfect.

Thank you so much, sir.

Thank you.

Moderator · Conference Operator

Thank you.

The next question is from the line of Pranay Roop Chatterjee from BCMPL.

Please go ahead.

PG Electroplast Limited May 29, 2023

Pranay Chatterjee

Great.

Good morning.

Good afternoon, everyone.

My first question was on your margins.

This quarter it was slightly higher, 9.2%.

If you could explain what led to this jump and what the normalized levels could be like for FY ‘24?

Moderator · Conference Operator

Thank you.

The next question is from the line of Kaushik Mohan from Ashika Stock Broking.

Please go ahead.

Kaushik Mohan

Hi sir, congratulations for the great set of numbers.

Sir, I just wanted to understand on the new capex and announcement that you did for the Rajasthan AC plant.

Can I understand what can be the optimum utilizations like asset terms that you can expect from this plant?

Moderator · Conference Operator

Thank you.

We have the next question from the line of Abhineet Anand from MK Global Financial Services.

Please go ahead.

Abhineet Anand

Thanks for the opportunity.

First of all, you told about the Rajasthan facility.

Can you just highlight what could be the capacity in terms of units or from where it goes to reach somewhere?

Moderator · Conference Operator

Thank you.

The next question is from the line of Farokh Pandole from Avestha Fund Management.

Please go ahead.

Farokh Pandole

Yes.

Hi, Pramod.

Congratulations on the outstanding results.

I had a couple of questions.

Firstly, you spoke about the capex plans for the coming year and beyond.

And given the fact that the QIP we were planning did not sort of materialize eventually, what is the thinking on that and how do we propose to replace that amount of funds going forward?

Also, secondly, with respect to the joint venture which you just announced, if you could just shed a little bit more color as to what the plans are and, you know, specifically how it would help you scale up in this particular category?

Moderator · Conference Operator

Thank you.

The next question is from the line of Mukesh Jain from Hem [inaudible] Securities.

Please go ahead.

Mr. Mukesh Jain, the line for you has been unmuted.

You may proceed with your question.

As there is no response from the current participant, we will move to the next question which will be from the line of Ashish Kumar Singh, an Individual Investor.

Please go ahead.

Ashish Kumar

Hello, sir.

Congratulations on your good set of numbers.

I was curious about the contribution that you will be putting in the JV that you mentioned.

So, can you highlight that?

Moderator · Conference Operator

Thank you.

The next question is from the line of Pranay Roop Chatterjee from BCMPL.

Please go ahead.

Pranay Chatterjee

Yes.

So, I think like you said this is with reference to how you are going to account your incentive both the state and PLI.

So firstly, in Q4 2023 how much was the incentive that you recognized as a part of your revenue?

Moderator · Conference Operator

Thank you.

The next question is from the line of Dhruvish Pujara from Premji Invest.

Please go ahead.

Dhruvish Pujara

Hi sir.

Thanks for the opportunity.

So, two questions.

First is can you help us with the units sold for the year in AC, both ICU and ODU combined, IDU and ODU combined?

And second is on the current capacity both in terms of solar versus and what is that number for IDU and ODU combined?

Moderator · Conference Operator

Thank you.

The next question is from the line of Sandeep Tulsiyan from JM Financial.

Please go ahead.

Sandeep Tulsiyan

Yes, very good afternoon and congratulations on a great set of numbers.

I just wanted some of your thoughts on how the industry structure is moving in terms of competition.

One is, you know, we've seen marginalization of market share of larger brands and a lot of new upcoming brands as well as the in-house brands of retailers and online sellers are gaining share.

So, we'd be glad to know your thoughts on this because these brands will use more outsourcing because they might not be having enough where with all to set up new plants.

So, how are you looking at the whole structure moving forward?

Do you really think these small brands or in- house brands of large retailers can actually make a dent to the larger guys?

Moderator · Conference Operator

Thank you.

The next question is from the line of Pranay Roop Chatterjee from BCMPL.

Please go ahead.

Pranay Chatterjee

Hey sorry just one quick question.

Given that we have been hearing commentary of the summer season getting delayed and AC inventory is sort of piling up.

What is your sense on the latest situation of inventory in the market and do you expect Q1 maybe to limit in growth on a Y-O-Y basis and then you know maybe Q2, Q3 onwards sort of picking up.

What sort of trend do you see you know intra quarter basis?

Moderator · Conference Operator

Thank you.

The next question is from the line of Kaushik Mohan from Ashika Stock Broking.

Please go ahead.

Kaushik Mohan

Hi sir.

Sir, one question on this JV.

It's more or less if you don't like what can be the total sales that you can expect from this JV?

And the cost you told that it will be dealt in next one month.

So, can I understand how this entire JV will work out to you people sir?

Moderator · Conference Operator

Thank you.

As there are no further questions from the participants, I would now like to hand the conference over to Mr. Gaurav Uttrani for closing comments.

Over to you, sir.

Gaurav Uttrani

I would like to thank management for giving us the opportunity to host PG Electroplast call.

Any closing remarks from your side, post which we will conclude the call?

Moderator · Conference Operator

Thank you.

On behalf of JM Financial, that concludes this conference.

Thank you for joining us.

You may now disconnect your lines.

Questions and answers

Moderator · Conference Operator

Thank you very much.

We will now begin the question-and-answer-session.

The first question is from the line of Dhananjai Bagrodia from Ask Investment Managers Private Limited.

Please go ahead.

Dhananjai Bagrodia: · So right now, was it not available or was the cost essential quite a bit?

Sir, thank you.

I wanted to ask you about AC now.

How do we see that?

This year was obviously great numbers.

How do we see that happening over let's say, over two years as companies might be moving and we see any terms of traction on that?

And B, how do we see working capital being for the next year?