Pearl Global volume growth and capacity expansion underpin margin-led earnings outlook

Investment View and Rating

Motilal Oswal Financial Services (MOFSL), in its August 6, 2026 results update on Pearl Global (PGIL), reiterated its Buy rating after strong 1QFY27 execution. The broker expects continued mid-double-digit revenue growth, supported by capacity additions, improving utilisation and a better product mix.

MOFSL's investment view is supported by PGIL's relationships with its top five customers, ongoing expansion in India and Bangladesh, and an asset-light model that it believes can support a gradual recovery in earnings quality and strong return ratios.

Strong 1QFY27 Operating Performance

Reported consolidated revenue rose 24% year on year to Rs 15,283 million in 1QFY27, driven by 21% volume growth and an improved order book across product categories. Revenue was 14.2% above MOFSL's estimate of Rs 13,384 million. Realisation increased 3% year on year to Rs 735 per piece, while capacity utilisation was around 83% during the quarter.

Gross margin expanded to 51.5%, aided by stronger volumes and a higher contribution from value-added products. EBITDA was 26.8% above MOFSL's estimate, while adjusted PAT was 33.2% above the broker's estimate.

India Business: Margin Pressure but Product-Mix Opportunity

India business revenue grew 29% year on year to Rs 3,400 million. However, the adjusted EBITDA margin declined to 6.6% because of higher other expenses, principally manufacturing expenses. Management said wage costs at four Haryana factories constrained standalone India margins; excluding this impact, India EBITDA margin would have been about 9%.

India is operating at roughly 65-70% utilisation and is shifting from fashion products towards higher-margin core products. The Bihar Phase 2 woven facility is under construction. At full capacity, it can ship about 0.4-0.5 million pieces a month, compared with the current 120,000-130,000 pieces a month.

Capacity Expansion and Growth Outlook

Management targets high-teen revenue growth in FY27, double-digit full-year EBITDA margins and around 12% EBITDA margin over the longer term. Achieving these targets is subject to improvements in product, customer and geographical mix. The company plans FY27 capex of Rs 2,000-2,500 million.

• Bangladesh expansion: Expansion is scheduled to begin in September 2026, with orders expected from 2HFY27. Management indicated that total capacity could reach 125-130 million pieces by 2028.
• UK opportunity: Management expects UK business growth after the UK FTA. PGIL offers seven categories that can address about 70-75% of customer requirements.
• India capacity: The Bihar Phase 2 woven facility is expected to materially increase monthly shipment capacity once fully operational.

MOFSL Estimates and Valuation

MOFSL forecasts revenue, EBITDA and PAT compound annual growth rates of 16%, 29% and 34%, respectively, over FY26-28. Following the quarterly performance, the broker raised its FY27E and FY28E estimates across revenue, EBITDA and PAT.

The revised target price is Rs 2,650, compared with Rs 2,460 previously. The target is based on 16 times FY28E EV/EBITDA.

Key Risks

• Tariff changes and exposure to the US market.
• Raw-material and broader cost pressure.
• Project concentration and customer concentration.