Geojit Financial Services research report on PG Electroplast
PG Electroplast Ltd (PGEL), the flagship entity of PG Group is a leading electronic manufacturing service provider in India, having a diverse portfolio and panIndia presence. The Indian Room Air Conditioner (RAC) industry is poised to deliver a healthy 15% CAGR over FY24-FY27E, led by rising consumption and low penetration (8%) compared to global markets (42%). PGEL is currently the second largest RACs player & second largest ODM (Original Design Manufacturer) for washing machine. A prominent player in the consumer durable industry, diversified from a plastic moulding company to an EMS player with the capability to manufacture RAC, WM, sanitaryware, and TV. We expect PGEL’s revenue to register 27% CAGR over FY25E-FY27E. The focus on backward integration and growing demand for consumer durables, we expect EBITDA margin to improve from 9.5% in FY24 to 10.3% in FY27. PGEL’s ROE may dip in FY25 due to the impact of QIP, we expect an improvement in asset turnover and PAT margins could enable ROE to improve to 15% by FY27E.
Outlook
The stock is currently trading above its Avg + 1SD P/E of 54x. Given PGEL’s lean balance sheet and planned foray into EV, compressor manufacturing are expected to support the current premium valuation. We are initiating coverage on PGEL with an Accumulate rating and a TP of Rs 1,084, based on a P/E of 56x on FY27E EPS.
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