PG Electroplast Expects About 20% FY27 Room AC Growth

PG Electroplast Limited expects FY27 room AC deliveries of about 2.1-2.2 million units, close to 20% above 1.7 million units last year, despite broadly flat year-on-year volume growth in the second quarter. Management cited a strong second-half order book, lower channel inventory than last year and further price increases planned from January.

What is PG Electroplast’s FY27 room AC volume forecast?

PG Electroplast expects to deliver about 2.1-2.2 million room AC units in FY27, compared with 1.7 million units last year. Management did not disclose absolute second-quarter room AC volumes, but said the full-year objective represented volume growth of close to 20% as deliveries build in the second half.

The target comes after room AC revenue rose 36.2% year on year to Rs 1,561 crore in the first half of FY27. Consolidated first-half revenue crossed Rs 2,950 crore for the first time, while management said the company’s growth combined double-digit volume gains with a similar scale of average selling price increases.

The difference between the 36.2% room AC revenue increase and the volume target is important. Management said higher commodity costs and rupee depreciation were passed through to customers, meaning the first-half revenue change reflected both unit growth and price, rather than volume alone.

Why was PG Electroplast’s second-quarter room AC volume flat?

PG Electroplast said year-on-year room AC volume growth in the second quarter was broadly flat and primary sales were muted. Management nevertheless said industry feedback pointed to strong secondary sales through the channel, creating a contrast between shipments during the quarter and reported sales activity further down the distribution chain.

Management identified timing issues in August and September. It said August was affected by a goods and services tax announcement, while September sales started only after September 22; July was the more comparable month in the quarter. These factors were cited alongside the muted primary-sales trend.

The flat second-quarter volume comparison followed a first half in which the room AC business generated Rs 1,561 crore of revenue. Management said higher selling prices contributed to that result, so the 36.2% revenue increase does not indicate a matching rate of room AC unit growth in the second quarter.

What supports PG Electroplast’s second-half room AC outlook?

PG Electroplast said its room AC order book is strong for the second half and extends to March-April. Management expects better company performance in the December quarter and March quarter based on those orders and on feedback from clients.

Channel inventory is lower than last year, according to management. It said this condition, alongside strong secondary sales feedback, supports its expectation for higher second-half room AC activity, although it did not provide a numerical channel-inventory figure or quarterly unit forecast.

The room AC plan also sits within management’s internal target of about 20%-25% volume growth for the overall company. Inventory was slightly higher in the period because of stronger order books in air conditioners, washing machines and electronics, as well as higher raw-material prices, management said.

Washing machines add to the second-half production workload. First-half washing-machine sales exceeded Rs 500 crore and rose 60.7% year on year, while management expects full-year growth of about 45%-50% in that category. Electronics revenue grew 90.3% in the first half and represented 12% of revenue.

How will price increases affect PG Electroplast’s room AC sales?

PG Electroplast expects cumulative room AC realization growth of about 15%-20% in FY27, with management separately describing the cumulative increase across three to four quarters and the planned January action as around 15%. Price increases were taken in January, April and the quarter beginning in October.

Management said a further price increase from January 1 had been aligned with most customers. The January action is intended to reflect average costs during October, November and December, while management said price increases required in the room AC business through September had been passed through in October.

Management said gross contribution as a percentage declined year on year because higher commodity costs and rupee depreciation increased the sales value on which that percentage is calculated. Its contract-manufacturing contribution is generally a fixed amount per unit, rather than a percentage of the selling price, it said.

Second-quarter product mix also affected the reported percentage. Electronics, which management said carries lower margins, grew 90.3% in the first half, while higher semiconductor and memory prices lifted electronic-component values. Management said per-unit contribution remained in its usual range.

What other FY27 projects is PG Electroplast bringing into production?

PG Electroplast is prioritising the operation of projects that have received sizable capital expenditure over the past three years rather than pursuing substantial new opportunities in FY27 and FY28. Management identified air conditioners, washing machines, refrigerators and televisions as the product lines on which it intends to focus.

The refrigerator facility at Sri City in southern India is targeted to begin production in the last quarter of the current financial year. It will have capacity of 1.2 million units, beginning with direct-cool and side-by-side refrigerators before adding frost-free and multi-door models in a second phase.

At the Supa compressor project, management targeted trial production by the end of November and mass production in January-February. Its calendar-year 2027 target is more than 1.5 million compressors, with a decision on a second line possible in April-May if the season develops as expected.

Management also said second-half margins should be slightly better than first-half levels because of seasonal sales, operating leverage and typical fourth-quarter booking of production-linked incentives. However, it said manpower and other costs will rise as new facilities and existing production ramp up.

Conclusion

PG Electroplast’s FY27 room AC objective depends on a material second-half increase after a broadly flat second-quarter volume comparison. The company is targeting 2.1-2.2 million units against 1.7 million units last year, while first-half room AC revenue increased 36.2% to Rs 1,561 crore through a combination of volume and price gains.

The next indicators are December-quarter and March-quarter room AC execution, the January 1 customer price increase and the Supa project’s move from trial production by the end of November to mass production in January-February. Management may also decide in April-May whether to add a second compressor line after assessing the season.