The company’s management said it does not see any reason for not attaining 25%-30% revenue growth in the current financial year. It is also fairly confident that growth will not be a challenge for the next two to three years.
According to the management, the year has begun on a positive note and said that demand has played out in-line with their expectations.
It said room air conditioner (RAC) and washing machine (WM) posted their highest ever sales, while the company’s orderbook was healthy across all product line.
The company said the product business was the key contributor of growth, as it comprised 80% of sales.
Gross margin contracted due to elevated commodity prices, the management said, adding that the commodity cost increase was partially passed on to the customer.
PG Electroplast’s Washing Machine facility has come online in greater Noida, with proposed capacity addition of 1.8 million Washing Machines per year. It said automatic Washing Machines have grown 150% from last year.
The management said its strategic priorities include research and development, new product development, backward integration and capability enhancement.
It said the AC industry has done 10% – 15% better than the previous year, adding that secondary sales are turning out to be better than the primary ones. Overall margin of RAC outsourcing has also gone up.
The company said it is nearing normal inventory levels now, seeing competitive intensity and believes the inventory levels will go up in the coming quarters.
It said it is trying to control its operating expenses since the past few quarters.
The management said the RAC volume growth was at 20%-22% and value growth was at 10%-12% in the June quarter.
Margin recovery roadmap key to watch out for, says analyst
On another note, Manoj Gori, director of Equities, Equirus Securities, told CNBC-TV18 that PG Electroplast reported a strong topline growth but fell short on margin expectations. He said the second quarter is a seasonally weak one for RAC companies. He added that he would evaluate Blue Star, Voltas on a one-year time frame.
He said the growth that PG Electroplast reported — close to 38% into its RAC business — has been “extremely strong”. He said the pressure on the margins is bound to happen and he is of the view that the management’s commentary on margin recovery is key for brands such as PG Electroplast and Blue Star.
Stock performance
Shares of PG Electroplast gained 5.6% to hit an intraday high of 643.95 apiece on Friday. The stock has risen for seven out of the last 10 trading sessions.
Shares of PG Electroplast are now trading 2.8% higher after the earnings call at ₹626.9. The stock is also recovered significantly from the June lows of ₹450.
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