Vikas Gupta, Managing Director of PG Electroplast, expressed confidence in the company’s ability to manage commodity inflation by passing increased input costs onto customers, while also emphasizing the importance of value engineering and bill-of-material optimization to safeguard margins.
He noted that the current pricing landscape is manageable, though negotiations with customers typically involve some delay. Gupta believes demand should maintain its strength over the next two to three years, with pricing expected to stabilize as geopolitical uncertainties diminish.
The company reported a cash and bank balance of ₹491.3 crore as of the end of Q1FY27.
The stock was trading at ₹631.20 at 12:55 pm on the NSE, having declined more than 14% over the past year.
In the April-June quarter (Q1FY27), PG Electroplast reported revenue of ₹2,034 crore, a profit after tax of ₹75 crore, and margins of 7.3%.
This is an edited transcript of the interview.
Q: With revenue growth around 35% — has it surpassed your forecasts? After Q4, you expressed cautious optimism for FY27, but demand appears to have exceeded expectations.
A: Reviewing the first quarter, our internal projections were largely aligned with the achieved growth. We were hopeful for a strong AC season, and we experienced nearly 38% growth in our AC segment during the quarter. The washing machine segment also excelled, showing a 67% increase. We believe FY27 has begun on a positive note, and we remain cautiously optimistic that this trend will persist.
Q: During the conference call, you mentioned that demand has met or even exceeded your expectations, and the upcoming two to three years appear promising. Can you clarify if price hikes, due to commodity inflation, could impact demand? How do you view the outlook if supply-side volatility persists?
A: It’s important to recognize that demand is still robust despite current inflation challenges. We observe similar trends in other sectors; for instance, the two-wheeler industry continues to perform well even amid pricing volatility. We believe demand will stay strong despite these pricing challenges. Over the next two to three years, we anticipate more stability and consistency in pricing. As geopolitical issues are resolved, we expect pricing to become more predictable, aiding in demand forecasting.
Q: I would like to better understand your pricing strategy. Are further price hikes anticipated? You’ve already implemented some in Q1; should we expect more in Q2 with ongoing volatility?
A: Increases in raw material costs or foreign exchange fluctuations are usually passed down to our customers. However, there is often a delay in negotiating to fully pass on these costs. This discussion is ongoing, and we are optimistic about recovering the entire impact. Concurrently, we are collaborating with customers on value engineering and BOM optimization to alleviate cost pressures, which is an ongoing process.
Q: Your inventory at the end of FY26 was around ₹1,600 crore, which has decreased to roughly ₹1,000-1,100 crore by the end of May. What is the current inventory level, and what guidance can you provide moving forward?
A: We aimed to reduce inventory further, but faced challenges that prevented us from achieving this goal. Given current volatility and the unpredictable nature of supply chains, we prefer to maintain a slightly higher inventory level. Additionally, we foresee QCO-related challenges in the next two to three quarters. We are monitoring the situation, but we expect inventory levels to normalize over the next one to two quarters.
Q: What is the current inventory level?
A: The current inventory level stands at approximately ₹1,200 crore. We hope to reduce it further.
Q: In a scenario where supply-side issues linger while demand remains robust, there could be pressure on the balance sheet due to higher inventory, receivables, and creditors. What is the outlook for the working capital cycle? The company has also turned cash positive. How do you foresee the balance sheet evolving?
A: It’s important to note that the AC season is nearing its end, and we are witnessing a reduction in inventory levels. However, as we approach the next peak AC season, we plan to reassess the supply chain situation. Based on that assessment, we may decide to increase inventory for compressors, copper tubes, and other components. We expect to carry out this review around October or November.
Q: What is the current working capital cycle in terms of days?
A: The current working capital cycle is around 65-70 days.
Q: Is this still your target range?
A: Yes, we anticipate it will stay within that range.
PG Electroplast’s market capitalization currently stands at ₹18,020 crore.
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