PG Electroplast Ltd (PGELEC)

CMP: | 655 Target: NA Target Period: NA UNRATED

December 9, 2021

AC PLI & Product launches to drive future growth

Management Meet Note

We met the management of PG Electroplast (PGEL) to get an insight into its
business and future plans. PGEL is one of the leading Electronic Manufacturing
Service (EMS) providers for washing machines, Refregerators, Air conditioners and
Air cooler in India. The company serves 30+ brands in India which includes names
Particulars
such as LG, Whirlpool, Voltas, Havells, Carrier/Midea etc. It is also one of the PLI
licensees for the manufacturing of AC component in India Particular Ammount
Market cap (| crore) 1290.0
 PGEL’s revenue, earnings grew at a CAGR of 21%, 16% in FY18-21E Total Debt (| crore) 155.5
 Plans a capex of | 320 crore in next five years to boost AC component Cash & Inves (| crore) 15.0
manufacturing under PLI. EV (| crore) 1430.5
52 Week H/L 674/131
Equity Capital (| crore) 19.7
Face Value(|) 10.0
Management meet highlights:
 Plastic moulding and Product sales together accounted for ~87% PGEL’s Shareholding pattern
FY21 topline while rest came from electronics, moulds and other categories (in % ) Sep-20 Dec-20 Mar-21 Jun-21 Sep-21

 Plastic moulding revenue is likely to grow at CAGR of 15% in FY21-24E Promoter 69.5 69.9 69.8 69.8 65.8
supported by customer additions and wallet share gains from exsting FII 0.0 0.0 1.1 1.1 1.0
customers. Apart from washing machines & AC, PGEL is also looking to DII 0.0 0.0 0.0 0.2 0.0

ICICI Securities – Retail Equity Research

expand its business from sanitarywares and ceiling fan business
Others 30.5 30.1 29.1 29.0 33.2
 The Product business has recorded strong revenue growth of ~29% YoY in
Price Chart
FY21 (Vs 10% of overall revenue growth) led by capacity addition coupled
with customer additions in washing machines, air coolers and AC segments 700 20000
600
 PGEL is looking to increase its revenue contribution from Product business 500 15000
400
in the coming future (likely to grow at CAGR of 50% in FY21-24E) 300
10000
200 5000
 Company has recently introuduced manufacturing of LED TV for one of its 100
0 0
client. Looking to expand the capacity in the near future

Sep-21
Jan-20
Jun-20
Oct-18

Nov-20
Mar-19

Apr-21
Aug-19

 Company envisaged capex of | 320 crore over the next five years for
manufacturing AC components under the PLI scheme. Company has guided PGELEC NIFTY
PLI revenues to start flowing from FY23 onwards
 Company also started manufacturing/assembling of LED TV in Q2FY22 for Key risks
its two clients.
 Key Risk: (i) Higher dependency on
 Company has raised | 77 crore in Q2FY22 through the mix of Equity and seasonal products (ii) Delay in price
Converible debentures. hikes
 Debt levels to peak out in FY23E with improved operating cashflows Research Analyst Key Fina
Sanjay Manyal
PGEL’s revenue, earning grew at CAGR of 21%, 16% respectively in FY18-21 led by [email protected]
addition of new customers (into product division) and wallet share gains from
exisiting customers. The EBITDA margin increased by 100 bps to 7.1% during the Hitesh Taunk
same period lifted by positive operating leverage and sharp growth in relatively [email protected]
higher margin business (i.e. Product business).

Key Financial Summary

(| crore) FY18 FY19 FY20 FY21 CAGR (FY18-21)
Net Sales 399.4 508.4 639.4 703.2 21%
EBITDA 24.6 30.7 39.9 49.8 27%
EBITDA Margin (%) 6.1 6.0 6.2 7.1
Net Profit 7.5 9.9 2.6 11.6 16%
EPS (|) 4.0 5.3 1.3 5.9
P/E (x) 163.2 122.9 490.4 110.9
RoE (%) 5.7 5.9 1.8 6.4
RoCE (%) 7.4 7.1 7.4 9.7
Source: Annual report, investgor presentation, ICICI Direct Research
 Management Meet Note | PG Electroplast Ltd (PGELEC) ICICI Direct Research

Management meet highlights

 Started operations in 1977, PGEL is one of the leading players in India in
Electronics Manufacturing Services. It is a diversified EMS providing OEM
and ODM solutions for complete product and component manufacturing.
PGEL manufactures plastic moulded components, sheet metal components,
printed circuit board assemblies, finished product assemblies, tools and
dies, and specialized air conditioner components
 Company has total 6 manufacturing units and it is providing manufacturing
services to 30+ Indian and global brands
 Plastic moulding business segment contributes ~60% in PGEL’s topline in
FY21 followed by product, electronics and mould & others segment revenue
contributions of 27%, 6% and 7% respectively
 The plastic moulding segment includes manufacturing of plastic body for
consumer appliances such as washing machines, room air conditioners,
refregeratos, ceiling fans and sanitary ware products.
 Plastic moulding revenue is likely to grow at CAGR of 15% in FY21-24E
supported by customer additions and wallet share gains from exsting
customers. Apart from washing machines & AC, PGEL is also looking to
expand its business from sanitarywares and ceiling fan business.
 Under the Product segment the company provides ODM services for
product such as Air cooler, Washing machines and Room air conditioners.
 The Product business has recorded a strong revenue growth of ~29% YoY
in FY21 (Vs 10% revenue growth) led by capacity addition and customer
addition in all three product categories.
 PGEL’s AC manufacturing capacity includes 1.25lakh units/month of IDU and
50,000 units/months of ODU. The company is also going to manufacture AC
components such as control assemblies for IDU/ODU, cross flow fans, Heat
Exchangers, Sheet metal components, Plastic moulding components all
under the PLI scheme. It has envisaged | 321 crore investment plan over
the next five years to boost component manufacturing capcity.
 The company is confident of touching minimum incremental revenue target
each year under the PLI guideline (i.e | 250 crore, | 500 crore, | 750 crore,
|1000 crore and | 1250 crore through FY23 to FY27).
 PGEL is looking to increase its revenue contribution from Product business
in the coming future (the segment likely to grow at CAGR of 50% in FY21-
24E). Despite passing on PLI benefits to customers, the company is likely to
maintain overall EBITDA margin at 7% through positive operating leverage
and increasing revenue from ODM services.
 The company also started manufacturing/assembling of LED TV in Q2FY22
for its two clients. It has tied-up with one of the Chinese company for tech
know how and designing of LED TVs. The production will ramp up from
Q4FY22 onwards.
 Company has raised | 77 crore in Q2FY22 through the mix of Equity and
Converible debentures. The fund will be used against company’s | 120 crore
capex plan in FY22.
 The company/management has no future plans for equity dilutions. And the
future capex will be funded through mix of internal accurals and debt. The
company believes that its debt level may peak out from FY23 onwards.

ICICI Securities | Retail Research 2

 Management Meet Note | PG Electroplast Ltd (PGELEC) ICICI Direct Research

Exhibit 1: Segment wise revenue share in FY20 Exhibit 2: Segment wise revenue share in FY21

Product Sale
Product Sale
24%
27%

Mould
Manufactruin
g & Other
1% Mould
Plastic
Manufactruin
Moulding
Plastic g & Other
60%
Electronics Moulding 7%
7% 68% Electronics
6%

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 3: Revenue growth trend Exhibit 4: EBITDA & EBITDA margin movement
800 60.0 7.2
CAGR ~21% 7.0
700 50.0
6.8
703.2

49.8
600 40.0 6.6
639.4

(| crore)
6.4

39.9
500 30.0

(%)
6.2
(| crore)

508.4

30.7
400 20.0 6.0

24.6
399.4

300 5.8
10.0
5.6
200 0.0 5.4
FY18

FY19

FY20

FY21
100
0
EBITDA (| crore) EBITDA margin (%)
FY18 FY19 FY20 FY21
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 5: PAT & PAT margin movement Exhibit 6: Return ratios

12
14.0 2.5
9.7
12.0 10
2.0
10.0
11.6

7.4 7.1 7.4

8
1.5
9.9
(| crore)

8.0
(%)

(% )

6.0 6
7.5

1.0
6.4
4.0 5.7 5.9
0.5 4
2.0
2.6

0.0 0.0 2
FY18

FY19

FY20

FY21

1.8
0
FY18 FY19 FY20 FY21
PAT (| crore) PAT margin (%)
RoCE RoE
Source: Company, ICICI Direct Research
Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 3

 Management Meet Note | PG Electroplast Ltd (PGELEC) ICICI Direct Research

Exhibit 7: Business model

Source: Company, ICICI Direct Research

Exhibit 8: Key Clients

Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 4

 Management Meet Note | PG Electroplast Ltd (PGELEC) ICICI Direct Research

Financial summary

Exhibit 11: Profit and loss statement | crore Exhibit 12: Cash flow statement | crore
(Year-end March) FY18 FY19 FY20 FY21 (Year-end March) FY19 FY20 FY21
Revenue 399.4 508.4 639.4 703.2 Profit after Tax 9.9 2.6 11.6
Growth (%) 27.3 25.8 10.0 Add: Depreciation 13.4 16.3 18.0
Raw material expense 284.4 399.1 503.7 556.5 (Inc)/dec in Current Assets -38.8 -41.4 -55.4
Employee expenses 34.9 40.1 53.9 55.0 Inc/(dec) in CL and Provisions 23.7 22.5 77.9
Other expenses 30.8 38.4 41.8 41.9 Others 10.3 14.8 18.4
Total Operating Exp 374.9 477.7 599.5 653.4 CF from operating activities 18.6 14.8 70.6
EBITDA 24.6 30.7 39.9 49.8 (Inc)/dec in Investments 0.0 0.0 -0.2
Growth (%) 24.9 30.1 24.7 (Inc)/dec in Fixed Assets -37.4 -49.4 -37.9
Depreciation 11.7 13.4 16.3 18.0 Others 0.0 1.4 -3.9
Interest 10.6 10.3 14.8 18.4 CF from investing activities -37.4 -48.0 -41.9
Other Income 5.3 3.2 2.5 2.6 Issue/(Buy back) of Equity 2.2 0.9 0.2
PBT 7.5 10.2 9.3 15.1 Inc/(dec) in loan funds 3.1 55.0 -17.8
Total Tax 0.0 0.2 6.7 3.5 Dividend paid & dividend tax 0.0 0.0 0.0
PAT 7.5 9.9 2.6 11.6 Others 15.7 -11.0 -14.0
Source: Company, ICICI Direct Research CF from financing activities 21.0 44.9 -31.6
Net Cash flow 2.2 11.6 -3.0
Opening Cash 4.1 6.3 17.9
Closing Cash 6.3 17.9 15.0
Source: Company, ICICI Direct Research

Exhibit 13: Balance sheet | crore Exhibit 14: Key ratios

(Year-end March) FY18 FY19 FY20 FY21 (Year-end March) FY18 FY19 FY20 FY21
Liabilities Per share data (|)
Equity Capital 16.4 18.7 19.5 19.7 EPS 4.0 5.3 1.3 5.9
Reserve and Surplus 114.4 150.4 156.7 172.8 Cash EPS 10.3 12.5 9.6 15.1
Total Shareholders funds 130.8 169.0 176.2 192.5 BV 70.1 90.6 89.5 97.7
Total Debt 115.2 118.3 173.3 155.5 DPS 0.0 0.0 0.0 0.0
Other non current liabilities 0.3 0.2 2.7 5.6 Operating Ratios (% )
Total Liabilities 246.3 287.4 352.2 353.6 EBITDA Margin 6.1 6.0 6.2 7.1
Assets PAT Margin 1.9 2.0 0.5 1.7
Gross Block 201.4 228.0 305.2 340.2 Asset Turnover 2.0 2.2 2.1 2.1
Less: Acc Depreciation 22.2 35.4 51.4 67.1 Inventory Days 54.2 49.0 48.3 48.1
Total Fixed Assets 202.2 226.2 259.3 279.1 Debtor Days 46.3 60.8 57.8 76.4
Investments 0.0 0.0 0.0 0.2 Creditor Days 59.4 65.7 60.7 79.6
Inventory 59.3 68.3 84.6 92.6 Return Ratios (% )
Debtors 50.7 84.7 101.2 147.3 RoE 5.7 5.9 1.8 6.4
Loans and Advances 0.2 0.2 0.2 0.3 RoCE 7.4 7.1 7.4 9.7
Other CA 22.3 18.1 26.7 27.9 RoIC 5.3 6.5 6.7 8.3
Cash 4.1 6.3 17.9 15.0 Valuation Ratios (x )
Total Current Assets 136.6 177.6 230.6 283.0 P/E 163.2 122.9 490.4 110.9
Creditors 65.0 91.5 106.3 153.3 EV / EBITDA 57.1 45.7 36.2 28.7
Provisions 3.9 4.7 6.4 6.0 EV / Net Sales 3.5 2.8 2.3 2.0
Other CL 32.9 29.2 35.3 66.4 Market Cap / Sales 3.2 2.5 2.0 1.8
Total Current Liabilities 101.7 125.5 147.9 225.8 Price to Book Value 9.3 7.2 7.3 6.7
Net current assets 34.9 52.1 82.7 57.2 Solvency Ratios
Other non current assets 9.2 9.1 10.3 17.1 Debt / Equity 0.9 0.7 1.0 0.8
Total Assets 246.3 287.4 352.2 353.6 Current Ratio 1.9 1.8 1.9 1.7
Source: Company, ICICI Direct Research Quick Ratio 1.1 1.1 1.1 1.1
Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 5

 Management Meet Note | PG Electroplast Ltd (PGELEC) ICICI Direct Research

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 Management Meet Note | PG Electroplast Ltd (PGELEC) ICICI Direct Research

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