PG Electroplast, a leading manufacturer of room air conditioners, which saw a massive 30 percent selloff earlier this month following a guidance cut and weak summer season sales, is in focus after its stock exiting the F&O ban and the company announcing a partnership with a global Point-of-Sale (POS) device maker on August 20.
Shares of PG Electroplast are higher by over 5 percent in the trading session, though they are lower by 30 percent over last one month and down 45 percent on YTD basis.
This agreement marks PGEL’s entry into payments and fintech hardware segment, which broadens the company's presence beyond consumer electronics into digital infrastructure solutions, seen as a 'high-growth' space by the company. As part of the agreement, PG Electro will manufacture PAX-branded POS devices at its existing facilities.
"With this partnership, PGEL becomes one of the very few companies in India to manufacture POS devices, further diversifying our portfolio and reinforcing our commitment to scaling EMS in high-growth technology categories," Vikas Gupta, Managing Director – Operations, PG Electroplast said.
India's digital payments ecosystem has been one of the fastest growing in the world, and this partnership aligns with the Make in India theme. "Partnering with PG Electroplast allows us to strengthen our presence in India by combining PAX’s technology leadership with PGEL’s proven manufacturing expertise," Sanjeev Sandhu, CEO of PAX India said.
During the June quarter, PG Electro's net profit fell 21 percent on year to Rs 67 crore as against Rs 85 crore a year ago, as an early arrival of monsoon impacted seasonal sales, prompting it to lower its FY26 growth guidance. Following order cancellations this summer, the AC maker is now sitting on a substantial inventory of air conditioners and raw materials worth Rs 1,300 crore, which has cast a shadow on the full-year guidance.
"...we were confident heading into FY26, and our guidance reflected that optimism. But what changed quite quickly and unexpectedly was the weather. The monsoon arrived earlier than usual, and the room AC season ended abruptly. Sellout in the trade channel was lower than forecasted and inventory levels stayed higher for longer. In hindsight, we were not fully prepared for that kind of shift in this quarter," Vishal Gupta, MD (Finance), PG Electroplast had said after the June quarter earnings.
The company had invested to set up a new air conditioner compressor plant along with a Chinese partner for internal requirement as well as to supply to other OEMs, which has been delayed to fiscal 2027, adding to the recent sour sentiment.
However, Geojit Financial recently issued a Buy call though with a lower price target of Rs 623 per share, stating that all negatives are priced in. Geojit expects PGEL's inventory to be cleared in H2FY26 as seasonal demand picks up, with management looking to diversify to other business verticals like refrigerator, EV and compressor manufacturing.
"...we are planning a lot of diversifications and the results of those will be visible to you in the coming years," Pramod Gupta, CFO, PGEL said during the June quarter earnings call.
As of FY24, PGEL generated over 60 percent of its revenue from air conditioners, washing machines and air coolers, and has now started to diversify into electronics, printed circuit board assemblies as well as plastic moulding. PGEL has already tied up to make EVs and lithium-ion batteries in partnership with Spiro Mobility (Africa).
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