After sinking 23 percent in the previous session, shares of PG Electroplast (PGEL) extended its fall in trade on Monday, August 11, as investors continued to offload their holdings. The bulk of the losses today came after domestic brokerage Nuvama Institutional Equities trimmed its target price on the stock by 35 percent.
On August 8, the EMS firm posted a net profit of Rs 67 crore, down 21 percent from Rs 85 crore a year earlier, while revenue grew 14 percent YoY to Rs 1,504 crore.
The company also cut its profit guidance to Rs 310 crore for the financial year 2026, down 23 percent, sparking a sharp sell-off. It also expects its consolidated revenue for FY26 to rise 17-19 percent to about Rs 5,700-5,800 crore, lower than the earlier forecast of 30.3 percent growth to Rs 6,345 crore.
While sales in April were robust (+70 percent YoY), May moderated to 18 percent growth, and June and July suffered a sharp order cancellations (-70 percent YoY), leading to adverse operating leverage.
“The early arrival of the monsoon impacted seasonal sales for Room ACs, making Q1 a more subdued start to the year. However, underlying demand indicators remain robust, and we see significant long-term potential given the relatively low penetration levels in core categories like Room ACs and Washing Machines," said the firm, following its earnings.
However, Nuvama was not convinced. While the brokerage maintained its 'buy' call, it slashed its 12-month target price on the firm to Rs 710, down from Rs 1,100 per share. Given the firm's significant room air conditioner inventories, the firm will have very weak September and December quarters, according to the brokerage.
PG Electroplast is carrying over Rs 1,350 crore in inventory (97–98 percent is raw material), which expected to normalise only by Q3FY26. "The compressor JV is likely to commission only in FY27 (earlier FY26), pending approvals from the Chinese partner," said Nuvama.
Over the past four sessions, the firm's shares have tanked nearly 40 percent. At 10.50 a.m., shares of the firm were quoting Rs 502.85, down 15 percent on the NSE.
In a conversation with CNBC-TV18, PG Electroplast MD Vikas Gupta said that weak secondary sales led to higher inventory, which is expected to normalise by October–November. Gupta said the long-term business outlook remains intact, with no downside risk to the net profit guidance of Rs 310 crore, adding that a single weak summer cannot derail the growth story.
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