Early and prolonged monsoons have weighed heavily on the consumer durables sector, leading to a subdued performance for PG Electroplast in both Q1 and Q2. While demand softness and elevated channel inventory have constrained near-term momentum, several structural drivers are now aligning for a stronger second half and an improved FY26 trajectory.
A Closer Look at PG Electroplast
PG Electroplast is a leading one-stop Electronic Manufacturing Services (EMS) and contract manufacturing partner for major consumer durable and electronics brands in India. With some of the largest plastic injection moulding capacities in the country, the company operates across the full spectrum of OEM and ODM manufacturing, spanning washing machines, room air conditioners, air coolers and LED televisions. It also continues to scale capabilities across components and finished goods, strengthening its position as a preferred partner for top domestic brands. The company currently commands a market cap of Rs. 16,817.95 crore, and its shares trade at Rs. 591.45. The stock P/E ratio is currently 65.9x correcting from a P/E ratio of 118.4x on 17th April 2025.
PG Electroplast works with a large range of leading consumer-durable and electronics brands in India, including Atomberg, Acer, AO Smith, Bajaj Electricals, Astral, Bluestar, BPL, Carrier, Croma, Crompton, Daikin, Flipkart, Foxconn, Godrej, Haier, Havells, Honeywell, Hyundai, Intex, Jaquar, Kelvinator, Kohler, Kodak, Lava, LG, Lloyd, Lumax, Onida, Reliance Digital, Voltas and Whirlpool.
Strong and Steady Guidance for FY26
Management has reiterated its FY26 revenue outlook at Rs. 57-58 billion, translating into a growth of 17-19 percent. Of this, Rs. 41-43 billion is expected to come from product sales, implying a year-on-year segmental expansion of 17-21 percent over FY25. The company has also maintained its FY26 profit after tax (PAT) guidance at Rs. 3-3.1 billion, indicating 3-7 percent YoY growth.
Based on these assumptions, the products business would need to deliver approximately 25 percent revenue growth in the second half of FY26 over the same period last year. Management’s confidence stems from robust order book visibility, rising wallet share from existing customers, and PGEL’s alignment with brands that continue to gain market share. They also expect roughly fifteen percent volume growth in the RAC segment during 2H, even as the broader industry remains relatively muted.
Finance costs had temporarily risen by Rs. 200 million in Q1 due to one-off factoring of receivables and discounted LCs, but these pressures have eased in Q2. Cash flow performance is projected to improve in the second half as working capital requirements normalise. The rationalisation of GST structures is also expected to benefit OEMs like PGEL, since the company was earlier paying 28 percent GST on inputs against an 18 percent GST on output, locking up working capital. The washing machine business is expected to contribute nearly fifteen percent of revenues in the next two to three years.
Ambitious Capex Cycle to Fuel Expansion
For FY26, PGEL plans capital expenditure of Rs. 7–7.5 billion. This includes Rs. 3.5 billion earmarked for its refrigerator plant at Sri City, Rs. 1 billion for expanding washing machine manufacturing in Noida, Rs. 1 billion each for RAC capacity additions at Supa and Bhiwadi, and the remainder for growth in coolers, plastic moulding and other product lines at Bhiwadi.
In addition, PGEL has announced major long-term investments of Rs. 10 billion each in Maharashtra and Andhra Pradesh, to be deployed over the coming four to five years. The Maharashtra facility is expected to break ground in FY27, while the Andhra Pradesh unit will begin with refrigerators, with production targeted for Q4FY27.
The company’s current monthly RAC manufacturing capacity stands at roughly 400,000 units (including 350,000 split ACs and 50,000 window ACs). This is projected to scale up to nearly 475,000 units per month by December 2025, with split AC capacity alone rising to about 425,000 units.
Inventory Pressures Likely to Ease Going Forward
Industry-wide primary sales have declined 20-25 percent in the first half of FY26, with an even steeper fall in secondary sales, leading to elevated inventory levels. PGEL indicates that overall inventory today is broadly similar to the levels seen at the end of Q1. However, improvements are expected through Q3 and Q4 on the back of GST-driven demand pick-up and pre-summer stocking.
PGEL’s estimates indicate that channel inventory is of 1.5-2mn units as of 1st Nov ‘25. PGEL’s own inventory is largely raw material, with minimal finished goods, and importantly, most raw material can be re-purposed for new BEE-rating compliant models. This minimizes obsolescence risk and supports smoother production planning.
Strategic Diversification to Strengthen Revenue Visibility
PGEL, along with its joint venture Goodworth Electronics, has filed applications for multiple new component categories, including display modules, camera modules, mechanical enclosures and bare PCB manufacturing. While approvals are pending, management expects them to be cleared in upcoming rounds, which would meaningfully expand the company’s backward-integration footprint.
The company has also partnered with PAX India (a subsidiary of PAX Global Technology) to manufacture POS machines at its existing facilities, with production slated to begin by Q3FY26.
However, diversification efforts in the EV and compressor domains are facing delays. PGEL’s EV partner has not yet secured approval for its motorcycles in India and has shifted some attention to African markets, postponing local commencement. Similarly, the compressor partner continues to await Chinese government approvals, with no recent progress.
Analyst Outlook
JM Financials has maintained a positive stance on PG Electroplast, assigning a twelve-month target price of Rs. 750, translating into an upside of 27.4 percent. The optimistic outlook is driven by sustained revenue visibility, improving order flows, a strong capex pipeline, the anticipated recovery in the RAC segment, and diversification into higher-value components and product categories.
Financial Snapshot – Q2FY26
Quarter-on-Quarter Performance: PG Electroplast reported a sharp sequential decline this quarter as sales fell from Rs. 1,503.85 crore in the previous quarter to Rs. 655.37 crore, translating into a 56.41 percent drop QoQ. Operating profit also weakened materially, reducing from Rs. 121.24 crore to Rs. 30.09 crore, a 75.17 percent reduction. Profit before tax declined from Rs. 84.69 crore to Rs. 6.32 crore, marking a steep 92.54 percent sequential fall. Net profit followed a similar trend, dropping from Rs. 66.98 crore to Rs. 2.76 crore, representing a 95.88 percent QoQ decline.
Year-on-Year Performance: On a yearly basis, revenue remained broadly stable, slipping from Rs. 671.30 crore a year ago to Rs. 655.37 crore, a modest 2.38 percent decrease. Operating profit, however, fell significantly from Rs. 56.40 crore to Rs. 30.09 crore, reflecting a 46.65 percent decline YoY. Profit before tax dropped from Rs. 30.06 crore to Rs. 6.32 crore, registering a 78.97 percent reduction. Net profit declined from Rs. 19.33 crore to Rs. 2.76 crore, amounting to an 85.73 percent contraction compared to the same quarter last year.
Written by Manan Gangwar
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