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00:00Good morning and welcome to Earnings Edge right here at ATV Profit.
00:09We are now taking stock of PG Electroprasts which is buzzing on the back of strong quarter
00:14one earnings that the company reported.
00:16And we are now going to be talking to Mr. Vikas Gupta, Managing Director of Operations
00:19at PG Electroprasts.
00:21Good morning and thank you so much for joining us today, sir.
00:24Just to start the conversation, I wanted to talk about the first quarter, of course.
00:28The growth has been stupendous, 100% growth in revenues, while net profit is up almost
00:33150% compared to the same time last year.
00:36So really strong numbers coming in.
00:38Could you just talk us through this particular quarter, how it's been?
00:41And of course, we've seen a lot of summer demand in this particular quarter because
00:45of a lot of product launches as well as heatwaves which might have worked in favor for a company
00:50like yours.
00:51So just if you could talk us through what the strategy has been in this particular quarter
00:55and on the products and how has the response been?
00:59Good morning, Puneet and thanks for having me on your show.
01:04Definitely the quarter one of FY25 has been kind of a stupendous quarter for us and it
01:11has gone beyond our expectations also in some ways.
01:16I think that the biggest growth driver for us has been definitely the air conditioner
01:20category in our product business.
01:23We have seen one of the very long and very severe spell of heatwave during the months
01:30of April and May, which has given a strong impetus to the demand for air conditioners.
01:38Other product categories as well, we'll talk about wash machines has also grown by more
01:42than 70%.
01:43Our AC business grew more than 130% in this quarter, our wash machine grew by 70%.
01:50So these have been the major growth drivers for our revenues.
01:54Definitely the product business category has contributed almost around 75% of our revenue,
02:01of total revenue and that's how we see the things going forward as well.
02:05We have already upgraded our revenue guidance as well for FY25.
02:11Just wanted to discuss a little bit more of what you said.
02:14So of course, roughly 1300 crores of revenue reported in this particular quarter, almost
02:191000 crores of revenues, like 75%, as you mentioned, coming from products.
02:22Now, I just wanted to know, what's the current breakdown of this particular range?
02:28Because we have ACs, which has done really well, which is particular launches.
02:32We've seen refrigerators as well as washing machines now, which is like top three contributors.
02:36And please correct me if I'm wrong.
02:38Just could you give us a rough range of which particular category and what is the particular
02:42size of this particular range of 1000 crores of the product divisions this year?
02:46So ACs has been almost around 880 crores out of this and washing machine grew by 70%
02:56and it was almost around 95 crores.
02:58Air coolers was also, which has grown significantly, but it was almost around 20 crores for us
03:04in the quarter one of FY25.
03:09And anything you could let us know about the product launches in this particular quarter,
03:14specifically, have you targeted launches?
03:17As you said, 880 crores coming from the AC division.
03:20So has there been direct launches in this particular space?
03:23And also, if you could talk us through the other division, which is Goodworth, which
03:26is into LED TVs, and that's a separate JV.
03:31But if you could just talk us through the launches and how the response been, where
03:35are you targeting these launches in this particular quarter has been?
03:37So in the first quarter of FY25, we started ramping up our production capacities from
03:46our North India plant for AC manufacturing, which we installed, which got into production
03:53in month of January.
03:55So we were able to get good numbers from that plant in North India for AC manufacturing.
04:02We already launched a window AC, which was a brand new product category for us in our
04:07lineup, which further bolstered our product offerings in our AC business.
04:12So we have got a very good response in our window AC as well from our clients.
04:17So in our JV entity of Goodworth, we are seeing a good traction now as we are entering a festive
04:25season for television business.
04:28And we have given a revenue guidance of around 600 crores from our Goodworth Electronics
04:33in our TV business.
04:34We have already onboarded almost four new large clients in our TV business in the last
04:40quarter, and we are looking at a very healthy order book for television as well as we enter
04:45the festive season.
04:48And so just to finish this discussion on products specifically, across segments, could you help
04:54us with what kind of clients have you added in this particular, maybe the last 12 months
04:59or so, which have been newer additions and which could drive, as you mentioned, the guidance
05:04have also been updated and we'll come back to that.
05:06But any kind of client names that you could mention to us that have been added in the
05:09last three to four quarters, which give us a guidance of who's going to be the top revenue
05:14contributors, because of course, new client addition will drive growth in revenue as well
05:18as sales.
05:19So just if you could help us on that, sir.
05:22So Puneet, revenue, actually, sorry, the client acquisition is something which is an ongoing
05:28activity.
05:28Our business development team is always working on that.
05:31We are bound by confidentiality agreements and we are not supposed to give out the names
05:37here.
05:37So definitely there are the large clients, both in AC, in Washington, as well as in
05:42television category that we have already onboarded.
05:45And we are very confident of ramping up the production for those large clients.
05:49And that's why we have upgraded our revenue guidance for the FY25s.
05:54And could you just quantify how much, because I think the previous range that you had mentioned
05:58was roughly around 40 to 100 crores for this particular year of fiscal year 2025, which
06:05is approximately around a 50% growth from last year.
06:07How much has been upgraded to in this particular year for now?
06:12So Puneet, earlier our revenue guidance was 3,400 crores for PG Electroplast and 600 crores
06:20from Budworth Electronics, which gives us a group revenue of 4,000 crores.
06:24Now we have upgraded this to a group revenue of 4,250 crores, in which we are sticking
06:30to a revenue guidance of 600 crores from Budworth Electronics.
06:34And we have upgraded from 3,400 to 3,650 crores for the revenue guidance of PG Electroplast.
06:43Now I just want to get into the margin picture as well, because you've seen that margins
06:47have been maintained in this particular quarter as well.
06:50Now previously you had mentioned that for this particular year of FY25, you see an upward
06:55bias on margins going forward as well.
06:59Could you just talk us through, your own design manufacturing was one of the highest, the
07:04higher margin products for this industry as well.
07:07What is the current share of ODM for you specifically?
07:11And what is the target going forward over the next 12 to 18 months?
07:15Puneet, we have already upgraded our PAT guidance also from 200 crores to 215 crores.
07:21We'll like to stick to that for as of now.
07:25Yes, definitely.
07:26And the ODM business is a better margin category in the product business.
07:32And for us, all our washing machines is a 100% ODM category business, as well as in
07:40air conditioners, almost around 90% of our business is an ODM category.
07:44So we are working on further expanding our ODM offerings in all these product categories.
07:53And specifically on margins, we've seen a lot of PLI benefits as well that have been
07:58given to certain companies.
08:00And of course, there has been applications of roughly 16 companies applying in this particular
08:04segment.
08:05Have you already applied for PLI benefits for the kind of investments that you've been
08:10doing over the last two years specifically?
08:12And has any kind of update that you could give us?
08:16Are you already receiving PLI benefits in the last year?
08:18If you could update us on that, sir.
08:21So Puneet, we received our PLI benefits for white goods PLI in FY24, which was to the
08:28tune of around 15 crores.
08:31This year, we should be getting a PLI incentive of almost around 30 crores, which we have
08:37taken into our revenue and the bad guidance of FY25.
08:42But for the current quarter, we are not factored in any kind of PLI incentive money.
08:48And the PLI specifically, it's for your air conditioner business or you've seen some
08:52PLI benefits for your washing machine or refrigerators as well?
08:56Puneet, as of now, there is no kind of a PLI scheme available for the washing machines
09:02or refrigerators.
09:03So the PLI incentive will be coming through the business of ACs only.
09:09Now, another very strong position has been on your debt profile because it has been reduced
09:14significantly over the last year.
09:16And we've seen that net debt to EBITDA levels also just around 0.07 times.
09:20Do you see maintaining this particular level going forward as well over the long term
09:26as well, because you've really cut down on debt in this particular year?
09:31And how does that shape into the kind of capex that you will be doing over the next for this
09:35year as well?
09:35And if anything, you could comment on the next year as well.
09:40Also, at net debt level, our company is having a debt of almost around 75 crores, which is
09:47if we compare it to a year ago, which was almost around 440 crores something.
09:52And in the last quarter, it was almost around 178 crores.
09:56For the current quarter that we have entered on June 24, we have done a net debt level
10:04amount of almost around 75 crores.
10:07We are into a capex cycle where we have given a guidance of capex of almost around 370 crores.
10:14Definitely, we will be covering that capex largely from internally acquired.
10:22But we might take up some kind of debt, maybe around 30, 40, 50 crores of debt to fund our
10:28capex cycle.
10:30And largely, the capex will be for like across divisions, I'm assuming?
10:36So basically, the capex cycle will be to further ramp up our capacities in our AC business,
10:42in our washing machine business.
10:44We are putting up a new greenfield plant for AC manufacturing now.
10:48And we are further expanding our capacities, putting up a greenfield plant in Greater Noida
10:53to further increase our capacity in washing machine business as well.
10:57Now, just my final question, sir, you didn't mention that guidance has also been up for
11:01this particular year.
11:03You already achieved half of the revenue in this particular quarter itself, like 300 crores,
11:09roughly one-fourth of that.
11:10So for this, for going forward now, I just wanted to know that specifically, what will
11:17be the growth drivers in this particular?
11:19Will it be the existing clients, revenue will be picking up from them specifically as well?
11:26Or do you see newer clients getting added in this particular year?
11:29And also, if I could just get one comment from you on the budget as well.
11:33We've seen that there's been no new addition of PLI schemes across sectors as well.
11:39We've seen that certain industry players in EMS have been hoping for some PLI benefits
11:44and for components specifically.
11:47If you could just talk us through any kind of discussion that you might have had into
11:52this and are you expecting something in this particular year?
11:55What could be that specific thing which could benefit the EMS players like yourself?
12:02So for us, we are planning to maintain our growth momentum in our product category.
12:08We are already added quite a few new clients in AC business as well as in washing machine
12:12business.
12:13That's why we are hopeful of maintaining our revenue guidance, which we have already
12:17upgraded.
12:18Regarding the budget, definitely, we were expecting some kind of announcement from the
12:23government on certain kind of PLI scheme on electronic components.
12:28I think it is already in works.
12:31It is a work in progress.
12:32I think we should be expecting some kind of announcement from the government in a couple
12:36of months for that.
12:37We are quite hopeful of the PLI scheme on electronic components and we also intend to
12:42participate in same.
12:45Do you see any kind of discussion happening right now for other products like you mentioned
12:49washing machines and refrigerators are not part of any kind of PLI scheme as of now.
12:54Do you see any kind of action on that space as well?
12:56Because we've seen across players in the EMS category have made investments into this
13:01particular space as well and a lot of it is coming up over the next 12 to 18 months.
13:06Do you see any kind of action on that space?
13:09To put it, I don't feel that we actually need any kind of PLI scheme on washing machines
13:16or on refrigerators as of now.
13:18Because there is a large portion of demand for the local consumption is being manufactured
13:24locally.
13:25So we feel that the ecosystem for the manufacturing of washing machines and the refrigerators
13:34is well developed.
13:35Definitely when we look at the component ecosystem like we are talking about the electronic
13:40components, there the need for PLI scheme is definitely there which will help us in
13:45further deepening the ecosystem for components which is much more required for further developing
13:53our industry.
13:56Mr. Gupta, thank you so much for joining us today and talking to us about the performance
14:00as well as what the next year looks like.
14:02We wish you the best for this particular fiscal year and look forward to our next conversation.
14:06But thank you so much for joining us today.
14:09Thank you so much.
14:10Thank you, Puneet.
14:11Well, that's all the time we have on this edition of Earnings As.
14:14Stay tuned to NET Profit for more.