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

(FINANCE), PG ELECTROPLAST LIMITED. · MR. PRAMOD GUPTA – CHIEF FINANCIAL OFFICER,

MR. PRAMOD GUPTA – CHIEF FINANCIAL OFFICER,

Moderator · Conference Operator

MR. DEEPAK AGARWAL - JM FINANCIAL.

PG ELECTROPLAST LIMITED · MODERATOR:

November 11, 2024

Moderator · Conference Operator

Ladies and gentlemen, good day and welcome to the PG Electroplast Limited Q2 FY25 Conference Call hosted by JM Financial.

As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes.

This presentation contains forward-looking statements based on the currently held beliefs of the management of the company which are expressed in good faith and in the Management’s opinion are reasonable.

The forward-looking statement may involve known and unknown risk uncertainties and other factors which may cause the actual results, financial condition, performance or achievements of the company or industry to differ materially from those in forward-looking statements.

These forward-looking statements represent only the company's current intentions, beliefs and expectations and any forward-looking statement speaks only as of the date on which it was made.

The company assumes no obligation to revise or update any forward-looking statements.

Should you need assistance during the conference call, please signal an operator by pressing “*” then “0” on your touchtone phone.

Please note that this conference is being recorded.

I now hand the conference over to Mr. Deepak Agarwal.

Thank you and over to you, Mr. Deepak Agarwal.

Deepak Agarwal

Thank you Seema.

Good afternoon, everyone on behalf of JM Financial.

I welcome you all to

PG ELECTROPLAST LIMITED · MODERATOR:

November 11, 2024 In first half of FY25 the company has posted industry leading growth in the product businesses and operating revenues for the product businesses worth Rs.1355 crore with 119% growth.

The room AC business contributed Rs.1118 crore which is a 143% growth on Y-o-Y basis.

The washing machine business also has grown by 41% on a Y-o-Y basis and air cooler business has also grown by 267% on Y-o-Y basis.

Order, book and visibility for product business remains very robust and the company is on the track to accelerate product business growth significantly in FY25. Our new product offerings in washing machines and room ACs and air coolers have received very good response.

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

The company continues to see increased interest in the business from new and existing clients and we remain very confident about the future growth prospects of our business.

For FY25 our revised operating revenue guidance is at least Rs.4250 crore in PG Electroplast and another Rs.600 crore in our JV company, Goodworth Electronics implying Rs.4850 crore of operating revenue as a growth, which is a growth of around 77% growth on FY24 numbers.

We are also revising our guidance for net profit to at least Rs.250 crore which is a growth of around 83% over FY24 net profit of Rs.137 crore.

The growth in product businesses that is washing machine, room air conditioners and air coolers is expected to be around 78% from Rs.1668 crore to around Rs.2,975 crore.

CAPEX guidance stands at around Rs.370 to Rs.380 crore and the progress on all infra and capacity expansion is going on as planned.

The company is on track to meet the capacity expansion guidance for the current year.

I would like to reiterate that the company remains committed to improving capital efficiency by improving asset turns through product business growth.

And we aim to deliver industry leading growth with best in class return ratios in the coming years.

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

Thank you.

Pramod Gupta

Hello and good evening everyone.

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

We have had great scale up during the first half of FY25 from an operation point of view in a very challenging supply chain environment.

The company has done excellently well.

The ASPs in RAC, washing machine and coolers were down due to lower commodity price during the period and availability of critical component was also a challenge due to import supply chain becoming more onerous.

We have posted industry-leading growth in RAC in revenues of 143% in the first half and 41% in washing machines.

The company's operating revenue for the first half are up 75% Y-o-Y at 1992 crore.

EBITDA grew 80.7% at 195 crores and net profit was up 126% to Rs.104.4 crore.

PG ELECTROPLAST LIMITED · MODERATOR:

November 11, 2024 During the first half, operating margins improved due to cost control, low commodity prices and operating leverage.

On the balance sheet side, the net debt stands at 238 crores at the end of first half due to inventory stocking up for upcoming AC season.

As stated by Vishalji, we have guidance of Rs.370 to Rs.380 crores of CAPEX in FY25. And again, I want to reiterate that improving capital efficiency by sweating our existing and new assets will be the key focus area of the company in the coming years.

And all our existing expansion plan are on track and the infrastructure and plant & machinery which is being planned for this year is likely to come on time for the capacity expansion that we have planned this year.

We remain very optimistic on the growth opportunities in our areas of focus, and we believe the company is well-placed to expand its market presence and market share further in the coming years.

With this.

I would now like to open the floor for Q&A.

November 11, 2024

Achal Lohade

Understood.

And, in terms of the incentives if you have booked anything in the 2nd Quarter and if yes, what is the quantum?

PG ELECTROPLAST LIMITED · MODERATOR:

November 11, 2024

Moderator · Conference Operator

Thank you.

We take the next question from the line of Arafat from InCred Research.

Please go ahead.

Arafat Saiyed

A couple of questions, sir.

Can you just give me the breakup of CAPEX of 370, 380 crore which we discussed and how much we already did and the balance where and how we are going to spend and also how are you going to fund the CAPEX?

PG ELECTROPLAST LIMITED · MODERATOR:

November 11, 2024

Arafat Saiyed

Got it, sir.

And sir, my next question on JV China for laptop.

So, how is the progress over there, and what kind of growth you are looking for the next couple of years and where do you reach in that segment?

Moderator · Conference Operator

Thank you.

The next question is from the line of Yash from Stallion Asset.

Please go ahead, sir.

Yash

My first question was on the fundraise that you announced, it's about up to 1,500 crores, in the board meeting so it's a significant amount and I just want to understand, how will this money be deployed?

PG ELECTROPLAST LIMITED · MODERATOR:

November 11, 2024

Moderator · Conference Operator

Thank you.

We take the next question from the line of Ashish Kumar Singh from VyomWealth Advisors.

Please go ahead.

Ashish Kumar Singh

Sir, my question is on this fund base.

Sir you talked about having those funds disposed hand and getting into the new growth opportunities.

Can you tell us about the industry that you are looking in the product line, any guidance on the product line which you are looking in the future?

Moderator · Conference Operator

Thank you sir.

We take the next question from the line of Nilesh Patil from ICICI Securities.

Please go ahead, sir.

Nilesh Patil

Sir my question is on the possibilities of entering into other segments as you mentioned in the previous question, that you may consider entering into some other consumer durable segments.

So, any specific kind of guidance over there, what kind of opportunities we may look for?

PG ELECTROPLAST LIMITED · MODERATOR:

November 11, 2024

Moderator · Conference Operator

Thank you.

The next question is from the line of Komal Iyer from NBG Investments.

Please go ahead.

Komal Iyer

Could you help me understand what is the reason for the drop in the revenue on a quarter-on- quarter basis?

Moderator · Conference Operator

Thank you.

The next question is from the line of Vipraw Srivastava from Phillip Capital.

Please go ahead.

Vipraw Srivastava

Obviously, you are into PCB assembly also, but the Government of India is now coming up with PLI on components, which will be a backward integration for EMS players.

So, any thoughts on that, any sort of backward integration we will be doing, let's say your number is doing bear boats also, so something on those line, is there thought process about that or it’s still a long way?

PG ELECTROPLAST LIMITED · MODERATOR:

November 11, 2024

Vipraw Srivastava

Okay.

Thank you and sir secondly, this year you are having 30 crore PLI in your financials in FY26 roughly if you can give an idea, what would be your PLI number it’s only an idea?

Moderator · Conference Operator

Thank you.

We take the next question from the line of Jalaj from Svan Investments.

Please go ahead.

Jalaj

Sir, I have one question with regards to the margins for the balance of the year that is the H2.

So, if I do a backward, back calculation onto the residual part from the already achieved margin in the currently in the PAT.

So, I come up with for the balance H1 it should be around 6.5%.

So, could you just give directionally where and what sort of margin accretion would we be seeing coming from or from Which place, is it coming from PV, JV or someplace else?

PG ELECTROPLAST LIMITED · MODERATOR:

November 11, 2024

Moderator · Conference Operator

Thank you.

The next question is from the line of Basant Bansal an Individual Investor.

Please go ahead.

Basant Bansal

While answering one of the earlier participant question, you said that second and 3rd Quarter is generally lower than the first quarter.

And in the first half, we have achieved around 2000 crore and full year guidance is 4,250 crore.

That means we will have to generate revenue of around 2200 to 2300 crore and given the fact that 3rd Quarter is low.

So, the majority of the sales or revenue will come in the 4th Quarter is my understanding correct?

Moderator · Conference Operator

Thank you.

The next question is from the line of Jeewan Garg an Individual Investor.

Please go ahead, sir.

Jeewan Garg

Sir in ACs normally compressor and other equipment were getting imported.

Now we are manufacturing it here or how it is working?

PG ELECTROPLAST LIMITED · MODERATOR:

November 11, 2024

Moderator · Conference Operator

Thank you.

The next question is from the line of Parth Shah from Tara Capital Partners.

Please go ahead.

Parth Shah

I just needed one clarification, the revised guidance for revenue and the profitability, is it after considering the PLI or is it before considering the PLI?

Moderator · Conference Operator

Thank you.

The next question is from the line of Bhagyavanth Reddy, an Individual Investor.

Please go ahead.

Bhagyavanth Reddy

Sir, at the start of your result document, you have published a standalone number.

Is this related entirely to our product business or how should we look at it?

Moderator · Conference Operator

Thank you sir.

The next question is from the line of Pratap Maliwal from Mount Intra Finance.

Please go ahead.

Pratap Maliwal

I just wanted some more clarity on that point you raised that the import supply chain is getting maybe an area of concern.

So, which areas are affected for us in terms of, and does this pose any risk to the guidance that we have given going forward in terms of the supply chain management is going to become a key monitorable, going ahead?

PG ELECTROPLAST LIMITED · MODERATOR:

November 11, 2024

Moderator · Conference Operator

Thank you.

The next question is from the line of Mythili Balakrishnan from Alchemy Capital Management Private Limited.

Please go ahead.

Mythili Balakrishnan

I just had a question on the AC, you mentioned that the growth in the AC segment was 212% right?

PG ELECTROPLAST LIMITED · MODERATOR:

November 11, 2024

Mythili Balakrishnan

And this is in terms of revenues which you are talking about?

PG ELECTROPLAST LIMITED · MODERATOR:

November 11, 2024

Moderator · Conference Operator

Thank you.

Ladies and gentlemen we take that as the last question for the day.

I would now like to hand the conference over to the management for closing comments.

Thank you.

On behalf of JM Financial, that concludes this conference.

Thank you for joining us and you may now disconnect your lines.

Questions and answers

Moderator · Conference Operator

Thank you very much.

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

We take the first question from the line of Vipraw Srivastava from PhillipCapital.

Please go ahead.

Vipraw Srivastava

First question is on the IT tailor what's the progress there, the management was stating that, quarter back that they would be sharing some news, but again, any updates because, there as some news articles also that, they are just struggling to meet the target.

So, any thoughts on the IT?

Vikas Gupta

So, please understand regarding the IT hardware PLI Scheme, the government is still trying to figure out how to restrict the import of IT hardware products into the country.

Once that is aligned and in place, then we should see some kind of traction for moving of manufacturing from overseas locations to India.

And we are not able to see much of a movement in the industry right now.

There are more than 26, 28 companies under this IT Hardware PLI 2.0 and most of those companies have not been able to tie up any business.

So, we are working with the government to see how to regulate and restrict the import of IT hardware product so that the local manufacturing can gain some momentum.

Vipraw Srivastava

Right.

And sir, secondly on the TV business obviously, this year you are bound for a very good healthy growth, 600 crore target, but going ahead, how do you see the TV business progressing.

Do you see competition, because one of the peer is saying that the TV, outsourcing market is almost over.

What are your thoughts on that, do you see a good opportunity in the TV outsourcing market any thoughts on that?

Vikas Gupta

Sir please understand, we are seeing a very strong momentum.

Please note that we have a very small base as compared to other competitors and we are seeing a very strong growth in our numbers for television business.

We are confident of maintaining that momentum going forward as well in FY26 as well.

And we are already working on certain new platforms in television and

PG ELECTROPLAST LIMITED · MODERATOR:

November 11, 2024 we are in process of acquiring more clients.

So, we are confident about the numbers for TV.

Definitely the business is very competitive, so we need to maintain a very tight and lean cost structure for that.

Vipraw Srivastava

Fair enough.

And so finally, last question on the AC business, obviously last year was very good with the summer around 20% volume growth was there.

But this year, what kind of volume growth anticipating for the industry in next summer cycle, which is in 2025 and any thoughts on that?

Pramod Gupta

We see a strong momentum continuing at least till March and after that actually, how the monsoon season pans out and how things happen will decide the course of growth.

But at least till March, the order book is very, very strong, and based on that order book only, we have been able to revise our guidance upwards.

So, if you see, we have revised our revenue guidance and bottom line guidance very significantly by almost more than 15% and that is largely due to very strong product business, overall product business momentum that we see in coming months gives good visibility.

Moderator · Conference Operator

Thank you sir.

The next question is from the line of Achal Lohade from Nuvama Institutional Equities.

Please go ahead.

Achal Lohade

The first question I had, if you could give a, while you have given for the first half growth, if you could spell out for the 2nd Quarter, specifically what has been the growth across the key categories?

Pramod Gupta

I will just give you those.

So, in AC we had a growth of 212% on a Y-o-Y basis for the quarter.

For the washing machine, the growth stood at 23% and for the coolers the growth was 191%.

Achal Lohade

Understood.

Sir, if you could also give us the mix from molds, plastic molding and tools?