PG Electroplast capacity expansion and compressor integration support earnings growth outlook

Investment View and Valuation

ICICI Direct Research’s August 10, 2026 result update retains a BUY rating on PG Electroplast Ltd. following a strong Q1FY27 recovery after FY26 was affected by a washout summer. The broker has increased its growth estimates and target price on an optimistic outlook supported by broad-based growth, capacity expansion, product diversification and deeper backward integration.

The target price is Rs 780, based on 48 times FY28E EPS, compared with the current market price of Rs 631. PG Electroplast is an electronics manufacturing services and plastic injection moulding company serving more than 70 Indian and global brands as an OEM and ODM across room air conditioners (RAC), washing machines, televisions and automotive parts.

Q1FY27 Financial Performance

Reported Q1FY27 revenue rose 35.2 per cent year on year and 18.5 per cent sequentially to Rs 2,034 crore. EBITDA was Rs 148 crore, up 22 per cent year on year and 25 per cent sequentially. Reported EBITDA margin was 7.3 per cent, down 78 basis points year on year but up 37 basis points sequentially. PAT grew 13 per cent year on year and 17 per cent sequentially to Rs 75.3 crore.

Broad-Based Segment Growth

Growth was broad based across the company’s key segments. RAC revenue represented 69 per cent of sales and grew 38.1 per cent year on year, compared with approximately 25 per cent industry growth. Washing-machine revenue, which accounted for 10 per cent of sales, rose 67.2 per cent. Electronics revenue, at 5 per cent of sales, grew 65.3 per cent, while plastic moulding revenue, representing 15 per cent of sales, increased 7.5 per cent.

Margin Outlook and Cost Pressures

Margin pressure was the principal negative in the quarter. Gross margin declined 140 basis points year on year and 122 basis points sequentially to 14.5 per cent because of higher commodity prices and rupee depreciation. Management said copper, aluminium and plastic inflation affected percentage margins, although per-unit margins remained broadly stable.

ICICI Direct noted that cost control and operational efficiencies helped contain the impact on EBITDA margin. The broker expects better commodity-cost pass-through and customer pricing ahead of the next RAC season, and estimates that EBITDA margin will improve to 8.8 per cent in FY28E.

RAC Growth and Product Diversification

Management expects structural RAC demand to remain supported by low household penetration, rising incomes and an increasing outsourcing trend among brands. PG Electroplast’s RAC volumes grew approximately 20 to 22 per cent year on year in Q1FY27.

Management expects full-year volume growth above 20 per cent. If industry growth is 15 to 20 per cent, it expects to outperform the industry by approximately 4 to 5 per cent. It indicated that PG Electroplast can grow 25 to 30 per cent over the next two to three years, aided by the low FY26 base and new product capacities. Management aims to reduce RAC’s revenue contribution to 50 to 55 per cent over this period.

Capacity Expansion and Capital Expenditure

The washing-machine facility has lifted annual capacity to approximately 30 lakh units from 18 lakh units, with utilisation expected at approximately 70 to 80 per cent by FY28E. The Sri City refrigerator facility is expected to start commercial production in Q4FY27, with annual capacity of approximately 12 lakh units. An anchor customer has committed to approximately 30 to 35 per cent of the refrigerator facility’s capacity.

FY27 capital expenditure is estimated at approximately Rs 400 crore, mainly for compressor and refrigerator projects and for consolidating plastic moulding and selected businesses on a larger land parcel.

Compressor Integration and Balance Sheet

A central investment driver is the Supa compressor project, which is scheduled for mass production in December 2026 or January 2027. The project will have annual capacity of approximately 20 lakh units, mainly for captive use. Management may add another 20 lakh-unit line depending on demand and ramp-up.

ICICI Direct believes compressor production could make PG Electroplast the only listed contract manufacturer with almost 100 per cent of its bill of materials in house. This could support value addition, customer stickiness, realisations and per-unit EBITDA. The report also notes that 50 to 60 per cent of Indian compressor demand is currently met by imports and that import restrictions could support domestic manufacturers.

Inventory has nearly normalised. As of Q1FY27, cash of Rs 491 crore exceeded debt of Rs 417 crore, resulting in net cash of Rs 74 crore.

Earnings Estimates

Key Risks

• Seasonality
• Execution delays
• Geopolitical uncertainties