PG Electroplast Ltd:Annual Report 2023-24 Analysis

PG Electroplast Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History: Established in 2003. PG Electroplast Ltd. (PGEL) started as a small molding shop and gradually transformed into a comprehensive Electronic Manufacturing Services (EMS) and Original Design Manufacturer (ODM) company.

Headquarters Location and Global Presence: Headquartered in New Delhi, India. The company primarily operates within India, but engages in international trade through exports to different countries.

Company Vision and Mission:

• Vision: To be a leading and trusted global partner providing innovative and sustainable solutions in the Electronic Manufacturing Services and Original Design Manufacturing sector.
• Mission: To consistently deliver high-quality products, exceptional customer service, and value to all stakeholders through continuous improvement, technological advancements, and responsible business practices.

Key Milestones in Their Growth Journey:

• Early years focused on building molding capabilities.
• Expanded into EMS and ODM for consumer electronics.
• Diversified into new sectors like automotive and medical devices.
• Significant investments in technology and infrastructure to enhance production capacity.
• Successfully established long-term relationships with leading brands in various industries.

Stock Exchange Listing Details and Market Capitalization: Listed on the Bombay Stock Exchange (BSE: 533502) and the National Stock Exchange (NSE: PGEL). Market capitalization fluctuates based on market conditions. Refer to current financial resources for accurate figures.

Recent Financial Performance Highlights: Refer to current financial resources for accurate financial data.

Management Team and Leadership Structure: The company is led by a board of directors and a senior management team comprising experienced professionals in manufacturing, engineering, finance, and marketing.

Any Notable Awards or Recognitions: PGEL has received various awards and recognitions for its quality, innovation, and performance. These typically include industry-specific awards related to manufacturing excellence and customer satisfaction.

Their Products #

Complete Product Portfolio with Categories: PGEL offers a diversified product portfolio across multiple categories:

• Plastic Molding: Injection molding, compression molding, and other plastic processing techniques.
• EMS (Electronic Manufacturing Services): Printed circuit board (PCB) assembly, component sourcing, testing, and packaging.
• ODM (Original Design Manufacturing): Designing, developing, and manufacturing complete products.
• Consumer Electronics: LED TVs, Washing Machines, Air Conditioners, Set-Top Boxes.
• Automotive Components: Plastic molded parts, electronic assemblies for automotive applications.
• Medical Devices: Manufacturing of plastic components and electronic assemblies for medical equipment.
• Home Appliances: Manufacturing for the appliance industry, including refrigerators and other kitchen appliances.

Flagship or Signature Product Lines: Their key strength lies in manufacturing complete products like LED TVs and washing machines for other brands. The automotive and medical device sectors are significant growth areas.

Key Technological Innovations or Patents: PGEL’s technological innovations focus on improving manufacturing efficiency, product quality, and design capabilities. This includes automation, advanced molding techniques, and PCB assembly processes.

Manufacturing Facilities and Production Capacity: PGEL operates multiple manufacturing facilities across India. These facilities are strategically located to serve key markets and offer ample production capacity to meet growing demand. Capacity details vary depending on product lines.

Quality Certifications and Standards: PGEL adheres to international quality standards and holds certifications such as:

• ISO 9001 (Quality Management System)
• ISO 14001 (Environmental Management System)
• IATF 16949 (Automotive Quality Management System)

Any Unique Selling Propositions or Technological Advantages:

• End-to-End Solutions: Offering a complete suite of services from design to manufacturing.
• Scalability: Ability to scale production to meet the needs of large and small customers.
• Technology Integration: Focus on incorporating the latest technologies in their manufacturing processes.

Recent Product Launches or R&D Initiatives: PGEL continually invests in R&D to develop new products and improve existing ones. Recent initiatives involve developing smart home appliance capabilities, advanced automotive components, and innovative medical device components.

Primary Customers #

Target Industries and Sectors: PGEL serves a diverse range of industries and sectors:

• Consumer Electronics
• Automotive
• Medical Devices
• Home Appliances

Geographic Markets (domestic vs. international): Primarily focused on the domestic Indian market.

Major Client Segments:

• Leading Consumer Electronics Brands
• Automotive OEMs
• Medical Device Companies
• Appliance Manufacturers

Distribution Network and Sales Channels: PGEL utilizes a direct sales approach to cater to its B2B customer base.

Major Competitors #

Direct Competitors in India and Globally:

• Dixon Technologies (India) Limited: A major player in the EMS and ODM space in India.
• Amber Enterprises India Limited: Another prominent EMS provider in India.
• Kaynes Technology India Limited: Another EMS provider in India.
• Global EMS Providers: Companies like Foxconn, Jabil, and Flex compete on a global scale.

Comparative Market Share Analysis: Market share information can be obtained from industry research reports.

Competitive Advantages and Disadvantages:

• Advantages:
  • Established presence in the Indian market.
  • Diversified product portfolio.
  • Strong focus on quality and certifications.
• Disadvantages:
  • Competition from larger global EMS providers.
  • Reliance on key customer segments.

How They Differentiate from Competitors: PGEL differentiates itself through its focus on end-to-end solutions, its ability to cater to a wide range of industries, and its commitment to quality and innovation.

Industry Challenges and Opportunities:

• Challenges:
  • Fluctuations in raw material prices.
  • Increasing competition.
  • Keeping up with technological advancements.
• Opportunities:
  • Growing demand for electronics in India.
  • Increasing outsourcing by global brands.
  • Government initiatives to promote local manufacturing (“Make in India”).

Market Positioning Strategy: PGEL positions itself as a reliable and innovative partner for companies seeking high-quality EMS and ODM solutions.

Future Outlook #

Expansion Plans or Growth Strategy: PGEL plans to expand its manufacturing capacity, invest in new technologies, and diversify its product portfolio to cater to emerging markets.

Upcoming Products or Innovations: Focus on developing smart home appliances, advanced automotive components, and innovative medical devices.

Sustainability Initiatives or ESG Commitments: PGEL is committed to environmental sustainability and has implemented initiatives to reduce its carbon footprint, conserve energy, and manage waste responsibly.

Industry Trends Affecting Their Business:

• Growing demand for electronics.
• Increasing adoption of automation and Industry 4.0 technologies.
• Shift towards sustainable manufacturing practices.
• Government support for local manufacturing.

Long-Term Vision and Strategic Goals: PGEL’s long-term vision is to become a leading global EMS and ODM provider, recognized for its innovation, quality, and sustainability.

Comprehensive Performance Overview #

3-Year Trend Analysis #

• Consolidated revenue demonstrated a 3-year Compound Annual Growth Rate (CAGR) of 34%, increasing from an unspecified base to ₹2,760 crores in FY2024.
• EBITDA followed with a 3-year CAGR of 38% to ₹275 crores in FY2024.
• Net profit grew by 77.2% to ₹137.3 crores in FY2024.
• Debtor turnover ratio declined from 6.63 in FY23 to 5.54 in FY24, attributable to a disproportionate increase in debtors relative to sales in Q4.
• Inventory turnover ratio decreased from 5.52 in FY23 to 4.92 in FY24, caused by higher year-end inventory for the expected AC sales season and reduced growth in cost of goods.
• Interest coverage ratio increased from 3.04 in FY23 to 4.41 in FY24 due to decreased interest outflow and improved operating margins.
• Debt-to-equity ratio improved from 1.37 in FY23 to 0.35 in FY24, attributed to a ₹500 crore QIP raise and debt repayment from internal cash flows.
• Operating profit margin improved from 8.15% in FY23 to 9.53% in FY24, due to declining commodity prices (especially copper).
• Return on Net Worth (RoNW) decreased from 21.88% in FY23 to 19.11% in FY24 due to an increased net worth from the QIP issue, outpacing the profit growth.

Business Segment Performance #

• Product Business: Accounted for 60.7% of total revenues in FY24, growing 24% YoY.
• Room Air Conditioners (RAC): Revenue of ₹1,317 crores, growing 26% Y-o-Y, despite an impacted first half.
• Washing Machines (WM): Revenue grew 20% YoY, with new products receiving positive market response.
• Air Coolers: Flat YoY revenue contribution of ₹38 crores due to unseasonal rains.
• Plastic Moulding: YoY sales growth of 8%, contributing ₹694 crores. Growth was driven by segments such as specialized plastic components for sanitaryware and fans.
• Electronics: Contributed 14% to FY24 consolidated sales, growth was up 132% over last year. The TV business(₹306 crores) was shifted to the Goodworth Electronics JV.
• Tool Manufacturing: Contributed ~0.4% to FY24 consolidated sales.

Major Strategic Initiatives and Progress #

• QIP issue of ₹500 crores completed, strengthening the balance sheet.
• Formation of a 50-50 Joint Venture, Goodworth Electronics Limited, with Jaina Group for TV manufacturing.
• Goodworth Electronics was approved for the IT hardware PLI scheme.
• Acquisition of Next Generation Manufacturers Private Limited for ₹45 crores to add impetus to expansion plans.
• Capacity expansion in Room AC with new greenfield capacity in Bhiwadi.
• New product development and validation in Washing Machines, Room AC and Coolers.

Risk Landscape Changes #

• Economic risks from interest rate and inflation fluctuations are being mitigated through diversification and balance sheet deleveraging.
• Currency fluctuation risk is managed through a risk management policy.
• Competition risk is addressed by a focus on product quality and customer satisfaction.
• Procurement risk is mitigated by backward integration.
• Technology risk addressed by investments in R&D.
• Employee risk reduced by contracting labor through a third-party for specific projects.
• Regulatory risk is mitigated by internal controls and compliance structure.

ESG Initiatives and Metrics #

• Increased sourcing of electricity from renewable sources, with power purchase agreements for solar energy.
• Installation of a 1.4 MW rooftop grid system solar panel at Unit 2 (Maharashtra) and a 0.65 MW solar plant at Unit - 4 (Maharashtra).
• Implementation of energy-efficient technologies (e.g., servo-hybrid injection moulding machines, turbo ventilation systems, LED lighting).
• Fire control room with zone-wise control panels and a Work permit issue system for heavy duty machine operators were implemented.

Management Outlook #

• Projected consolidated revenue of at least ₹3,650 crores for FY25, a 32.9% growth over FY24.
• Projected product business revenue of over ₹2,650 crores in FY25, up 59% from ₹1,668 crores in FY24.
• Targeting a net profit of INR 216 crores, a 58% increase over net profit of INR 137 crores in FY 2024.
• Planned capital expenditure of ₹350-380 crores for FY25 for new manufacturing units and capacity expansion.
• The immediate global economic outlook remains mixed and the expected moderation in inflation in the developed world would lead to monetary policy easing.

Detailed Analysis #

Financial Position Analysis #

Balance Sheet Analysis: 3-Year Comparative #

(INR Lakhs)

Significant Changes in Major Line Items (YoY > 10%) #

• Property, plant and equipment: Increased by 35.54% from FY23 to FY24.
• Capital Work-in-Progress: Increased significantly.
• Other Intangible assets: Increased significantly.
• Investments: Increased substantially.
• Other non-current assets: Increased significantly.
• Inventories: Increased by 53.77% from FY23 to FY24.
• Trade receivables: Increased by 26.31%.
• Cash and bank balances: Increased significantly.
• Loans: Increased significantly.
• Other financial assets: Increased.
• Other current assets: Increased.
• Equity share capital: Increased due to fresh equity issuance.
• Other equity: Increased significantly due to QIP proceeds and retained earnings.
• Non-Current Borrowings: Reduced.
• Lease liabilities: Increased significantly.
• Current Borrowings: Reduced.
• Trade payables: Increased by 65.75%.
• Other current financial liabilities: Increased.
• Other current liabilities: Increased.

Working Capital Trends #

• The Group shows the large increase in net working capital due to rise in inventories, trade receivables, trade payables.

Asset Quality Metrics #

Property, plant and equipment, intangible assets, and inventories have significantly increased from 2023 to 2024.

Debt Structure and Maturity Profile #

• Debt Structure: The Group has a mix of long-term and short-term borrowings.
• Maturity Profile: A significant portion of the debt is due within 1-5 years.

Off-Balance Sheet Items #

• Contingent Liabilities:
  • Claims against the company not acknowledged as debts: INR 1,550.02 lakhs.
  • Guarantees: Increased to INR 71,150.03 lakhs from INR 61,650.03 lakhs.
• Capital commitments: Increased to INR 3,950.21 lakhs from INR 530.99.

Operating Performance Analysis #

Revenue Breakdown by Segment/Geography with Growth Rates #

• Consolidated Revenue (FY2024): ₹2,746.50 crores, a 27.2% increase YoY.
• Product Business: Contributed 60.7% of total revenue (FY2024), with ₹1,668 crores, growing 24% YoY.
  • Room Air Conditioners (RAC): ₹1,317 crores (FY2024), a 26% YoY growth.
  • Washing Machines: 20% YoY revenue growth in FY2024.
  • Air Coolers: Flat YoY revenue of ₹38 crores in FY2024.
• Plastic Moulding: 8% YOY growth and contributing 694Cr.
• Consumer Electronics: This segment saw significant growth of 132% and, Contributed 14% to total revenue.
• Tool Manufacturing: ~0.4% to the FY2024.
• Geographic Revenue (FY2024):
  • India: ₹2,74,349.34 lakhs.
  • Outside India: ₹300.19 lakhs (0.14% of the total consolidated turnover)
• Goodworth Electronics(JV): TV buisness contributed 306 Cr.

Cost Structure Analysis #

• Cost of Materials Consumed (FY2024): ₹2,16,862.42 lakhs, representing the largest expense category.
• Purchase of Traded Goods: (FY2024),₹11,036.18 lakhs
• Employee Benefit Expenses (FY2024): ₹16,626.97 lakhs, a significant cost component.
• Other Expenses (FY2024): ₹11,216.81 lakhs, include a variety of operational costs.

Margin Analysis (Gross, Operating, Net) with Trends #

• Operating Profit Margin (FY2024): 9.53%, up from 8.15% in FY2023, indicating improved operational efficiency.
• Net Profit Margin (FY2024): 4.99%, increased from 3.59% in FY2023.

Operating Leverage #

• Depreciation and amortization increased YOY.

EPS Analysis (Basic/Diluted) #

• Basic EPS (FY2024): ₹54.73, increased from ₹35.78 in FY2023.
• Diluted EPS (FY2024): ₹54.07, increased from ₹33.77 in FY2023.

Cash Management Analysis: FY24 vs. FY23 #

Detailed OCF, ICF, FCF Components (Consolidated, INR Lakhs) #

Operating Cash Flow (OCF) #

• Profit before tax: FY24: 17,646.65; FY23: 9,754.32
• Non-cash adjustments (major items):
  • Depreciation & Amortization: FY24: 4,661.16; FY23: 3,495.07
  • Finance costs: FY24: 5,172.55; FY23: 4,793.17
  • Employee stock option scheme: FY24: 1,540.12; FY23: 339.40
  • Interest income: FY24: (1,130.14); FY23: (318.12)
  • Loss on sale of Property, Plant and equipment: FY24: 77.61; FY23: 23.59
  • Loss due to fire - Inventory & Assets: FY24: 368.51; FY23: Nil
• Working Capital Changes (net impact, excluding financing):
  • Trade payables Increased: FY24: 25,651.28; FY23: 12,089.09
  • Trade receivables Increased: FY24: (11,520.60); FY23: (22,686.85)
  • Inventories Increased: FY24: (19,431.33); FY23: (6,750.11)
• Net cash from operations before tax: FY24: 28,156.87; FY23: 18,315.71
• Direct taxes paid (net): FY24: (3,034.88); FY23: (935.96)
• Net OCF (A): FY24: 18,634.75; FY23: 4,573.79

Investing Cash Flow (ICF) #

• Purchase of Property, Plant & Equipment (PPE) and Intangible assets: FY24: (22,681.43); FY23: (15,456.56)
• Proceed from sale of property, plant and equipment: FY24: 99.42; FY23: 37.84
• Payment for acquisition of subsidiary: FY24: (4,501.00); FY23: Nil
• Investment made during the year: FY24: (878.30); FY23: (153.20)
• Maturity of bank deposit having maturity more than 3 months: FY24: (12,765.49); FY23: (2,025.10)
• Interest received: FY24: 805.06; FY23: 300.13
• Net ICF (B): FY24: (39,921.74); FY23: (17,296.89)

Financing Cash Flow (FCF) #

• Proceeds from long-term borrowings: FY24: 4,305.99; FY23: 11,543.27
• Proceeds from short-term borrowings: FY24: (13,303.62); FY23: 8,497.90
• Repayment of long-term borrowings: FY24: (11,172.88); FY23: (4,122.83)
• Proceeds from issue of equity share capital: FY24: 49,175.19; FY23: 334.89
• Payment of principal portion of lease liabilities: FY24: (363.58); FY23: (216.30)
• Payment of interest portion of lease liabilities: FY24: (372.60); FY23: (182.23)
• Interest paid: FY24: (4,830.26); FY23: (4,649.98)
• Net FCF (C): FY24: 23,438.24; FY23: 11,204.72

Working Capital Management Efficiency (Consolidated) #

• Debtors Turnover Ratio: FY24: 5.54; FY23: 6.63. The ratio decreased, indicating a less efficient collection of receivables.
• Inventory Turnover Ratio: FY24: 4.92; FY23: 5.52. The ratio decreased, indicating a slight decline in inventory management efficiency.
• The Consolidated data shows significant increases in both trade receivables and inventories, contributing to a larger working capital requirement.

CAPEX Analysis (Consolidated) #

• Consolidated level, there was a significant increase in capital expenditure (purchase of PPE and intangibles, including capital work-in-progress) from INR 15,456.56 lakhs in FY23 to INR 22,681.43 lakhs in FY24.
• There was a significant increase in the investment and construction of new building/floors.

Dividend Trends #

• FY24: A dividend of 20% (Rs. 0.20 per share of Re 1 paid-up) was recommended, not yet paid.
• Previous year dividend history is presented in other equity component.

Debt Service Coverage #

• Debt Service Coverage Ratio is not directly calculable from provided data. A proxy using “Profit before tax + Depreciation + Interest expense” can be calculated, resulting in:
  • FY24: INR (17,646.65 + 4,661.16 + 5,172.55) / (5,172.55 + 4,186.79) = 2.91
  • FY23: INR (9,754.32 + 3,495.07 + 4,793.17) / (4,793.17 + 5,786.26) = 1.71

Liquidity Position #

• Current Ratio: FY24: 1.46; FY23: 1.12. Improvement in the current ratio, but a more detailed analysis of current asset quality is needed.
• Cash and Cash Equivalents increased significantly, showing stronger short-term liquidity.

Financial Analysis of PG Electroplast Limited #

Key Performance Indicators #

A segment-wise financial analysis of PG Electroplast Limited, based on the provided Annual Report data.

Profitability Ratios (3-Year Trends) #

• ROE decreased, although net profit increased significantly, because the shareholder’s equity more than doubled due to the QIP issue.
• ROA improved, showing a better use of total assets to generate profit.
• Both operating and net profit margins improved, primarily driven by lower commodity prices and better cost control.

Liquidity Metrics #

• The current ratio improved, indicating better short-term liquidity and ability to meet short term obligation.

Efficiency Ratios #

• Inventory Turnover ratio declined as company is anticipating better sales during the year.
• Debtors turnover has declined due to large part of the sales happening during the 4th quarter and thus debtors increased disproportionately relative to the sales.

Leverage Metrics #

• Debt-to-Equity ratio significantly decreased because of the QIP issue, which increased equity, and debt repayment.
• Interest coverage ratio improved due to the decline in interest outgo and increased operating profit.

Working Capital Ratio #

• Working Capital Turnover Ratio: FY 2023-24 (Consolidated) - 4.05, FY 2022-23 (Consolidated) - 14.62
• Working Capital Turnover Ratio Decreased as the Company raised INR 500 Crores from QIP, part of which was used in working capital, while internal generation was used to pay the debt which improved the balance sheet.

PG Electroplast Limited Business Segment Performance Analysis #

Revenue and Profitability Metrics with Growth Rates #

• Consolidated Revenue: Grew by 27.2% to ₹2,746.50 crores in FY24, up from ₹2,159.95 crores in FY23.
• Product Business Revenue: Contributed 60.7% of total revenue, reaching ₹1,668 crores, a 23.8% growth.
• Room Air Conditioners (RAC) Segment: Revenue of ₹1,317 crores, marking a 25.7% YoY growth.
• Washing Machines Segment: Showed a 20% YoY revenue growth.
• Air Coolers Segment: Revenue remained flat at ₹38 crores due to unseasonal rains.
• Plastic Moulding Segment: Grew by 7.8% YoY, contributing ₹694 crores.
• Consumer Electronics: Grew 131.5% to Sales of INR 384 Crores.
• Consolidated Net Profit: Increased by 77.2% to ₹137.3 crores, up from ₹77.47 crores in FY23.
• Operating Profit Margin: Improved to 9.53% from 8.15%.
• Net Profit Margin: Increased to 4.99% from 3.59%.

Market Share and Competitive Position #

• Washing Machines: PGEL is positioned as the second-largest ODM player for washing machines in India.
• Room Air Conditioners: PGEL is the second largest player in terms of RAC finished goods sales to OEMs/brands.
• Plastic Moulding: PGEL largest manufacturer of plastic moulding for consumer durables.

Key Products/Services Performance #

• Room Air Conditioners: Strong growth, with a 25.7% YoY revenue increase.
• Washing Machines: Positive market response to new product ranges, contributing to 20% revenue growth.
• Electronics: A key driver due to PCB assemblies, experiencing a surge of 132% over the last year.
• Air Coolers: Flat performance due to external weather factors.
• Plastic Moulding: Some product like specialised plastic components grew faster.

Geographic Distribution and Market Penetration #

• The primary focus is the domestic Indian market.
• PGEL operates 11 manufacturing facilities located in Greater Noida, Ahmednagar, Bhiwandi, and Roorkee and a new unit comming in Rajasthan.

Segment-wise CAPEX and ROIC #

• Total Consolidated Capex (FY24): Approximately ₹277 crores.
• Planned Capex (FY25): ₹380 crores, with ₹170-180 crores allocated to land and building development.
• Return on Capital Employed (ROCE): 21.6% in FY24.

Operational Efficiency Metrics #

• Debtors Turnover: Declined to 5.54 from 6.63, due to increased debtors at the end of Q4.
• Inventory Turnover: Declined to 4.92 from 5.52.
• Interest Coverage Ratio: Improved to 4.41 from 3.04, due to reduced interest outgo and improved operating margins.

Growth Initiatives and Challenges #

• Growth Strategy: Focus on consumer durables, ODM business expansion, and operational efficiency.
• Capacity Expansion: Plans to add nearly 1 million square feet of new space, including a new RAC facility in Rajasthan and expansion at the Supa facility.
• Joint Ventures: Goodworth Electronics in partnership with Jaina, manufacturing TV.
• Challenges: Declining Average Selling Prices (ASPs) across all product categories, dependence on commodity prices (especially copper), unseasonal weather impacts.
• R&D investment to boost revenue.

Risk Framework #

Strategic Risks #

Competition Risk #

• Severity: High
• Likelihood: High
• Trend: Increasing
• Mitigation Strategies: Differentiation through exceptional product quality and customer satisfaction.
• Control Effectiveness: Partially effective, as indicated by sustained customer relationships, but continued pressure on pricing.
• Potential Financial Impact: Reduced market share and pricing pressures, impacting revenue and profitability.

Procurement Risk #

• Severity: High
• Likelihood: Moderate
• Trend: Improving
• Mitigation Strategies: Backward integration of manufacturing processes.
• Control Effectiveness: Increasing, due to ongoing backward integration efforts, but still dependent on external suppliers.
• Potential Financial Impact: Increased production costs, production delays.

Technology Risk #

• Severity: High
• Likelihood: Moderate
• Trend: Stable
• Mitigation Strategies: Significant investment in R&D to enhance products and develop new technologies.
• Control Effectiveness: Moderate, as heavy investment on R&D has been going on.
• Potential Financial Impact: Reduced market share and the need for substantial capital expenditure to catch up with technological advancements.

Operational Risks #

Economic Risk #

• Severity: Moderate
• Likelihood: Moderate
• Trend: Improving
• Mitigation Strategies: Diversification into new segments, strengthening the balance sheet, and reducing leverage.
• Control Effectiveness: Increasing, as seen by diversification efforts.
• Potential Financial Impact: Increased operating costs.

Employee Risk #

• Severity: Medium
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: Partnering with third-party contractors.
• Control Effectiveness: Partially Effective, as dependence on contractors create its own risks.
• Potential Financial Impact: Potential issues on productivity and efficiency, as skill gap may be present.

Financial Risks #

Currency Fluctuation Risk #

• Severity: Moderate
• Likelihood: Moderate
• Trend: Stable
• Mitigation Strategies: Regular evaluation of exchange rate fluctuations and implementation of risk management policies.
• Control Effectiveness: Partially effective, as exposure remains, but mitigation strategies are in place.
• Potential Financial Impact: Revenue impact due to exchange rate volatility. Foreign exchange fluctuations of 1% in INR against USD and CNY could cause fluctuations in profits.

Debtor’s Turnover #

• Severity: Moderate
• Likelihood: Moderate
• Trend: Declining, from 6.63 (FY 2023) to 5.54 (FY 2024), indicating a slowdown in collecting receivables.

Interest Coverage Ratio #

• Trend: Increasing from 3.04(FY 2023) to 4.41 (FY2024), suggesting improved ability to meet interest obligations.

Debt Equity Ratio #

• Trend: Decreasing from 1.37(FY 2023) to 0.35(FY 2024).

Compliance/Regulatory Risks #

Regulatory Risk #

• Severity: High
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Comprehensive internal control structure for regulatory adherence.
• Control Effectiveness: High, as indicated by the established internal control systems.
• Potential Financial Impact: Operational disruptions and reputational damage.

Emerging Risks #

Geopolitical Risk #

• Severity: High
• Likelihood: Moderate
• Trend: Increasing
• Mitigation Strategies: The company’s focus on the “China+1” strategy might be a partial mitigation.
• Control Effectiveness: Unknown, as strategies aren’t detailed.
• Potential Financial Impact: Supply chain disruptions, increased costs, reduced demand in affected markets.

Strategic and Management Analysis #

Long-Term Strategic Goals and Progress #

• PG Electroplast aims for a consolidated revenue of INR 3,650 crores for FY2025, a 32.9% increase over FY2024.
• Diversifying into high-demand areas such as washing machines, room air conditioners, refrigerators, ceiling fans, and sanitaryware.
• Significant capacity expansion is underway, including a new integrated unit for RAC manufacturing in Rajasthan and expansion at the Supa facility.
• Increasing capacity in washing machines from 1.2 M to 2.0 M to improve operational efficiency and boost growth.

Competitive Advantages and Market Positioning #

• Leading player in Electronic Manufacturing Services (EMS) and contract manufacturing in India, with a strong presence in the consumer durables sector.
• Largest manufacturer of plastic molding for the Consumer Durable and consumer electronic industry in India.
• Second-largest player in terms of RAC finished goods sales to OEMs/brands and the second-largest ODM player for washing machines in India.
• Enjoys cost leadership due to backward integration and scale.

Innovation Initiatives and R&D Effectiveness #

• Aggressively ramping up R&D spending to create added innovation for its product lines and develop bespoke solutions.
• Focus on ODM business growth includes innovative offerings in air coolers, washing machines, room air conditioners, and sanitary ware products.
• Investments in R&D are geared toward improving products and developing new technologies to meet diversified customer needs.

M&A Strategy and Execution #

• Acquired Next Generation Manufacturers Private Limited (NGM) in FY2024 for INR 45 crores.
• Formed a 50-50 Joint Venture, Goodworth Electronics Limited, with Jaina Group for manufacturing TVs.
• PG Technoplast, a subsidiary, acquired a 100% stake in Next Generation Manufacturers Private Limited.

Management’s Track Record in Execution #

• Significant revenue growth CAGR of 34% over the last eight years.
• EBITDA has also grown at a CAGR of 38% in the last eight years, with RoCE reaching 21.6% in FY2024.
• Operationalization of the Bhiwadi AC Unit by subsidiary PG Technoplast.

Capital Allocation Strategy #

• Significant capital expenditures, including INR 277 crores in FY2024 and a planned INR 350-380 crores for FY2025.
• Focused on capacity expansion, backward integration, and product development, particularly in the high-growth areas of RACs, washing machines, and air coolers.
• Building nearly 1 million square feet of new space.

Organizational Changes and Their Impact #

• Shift of the TV business to the Goodworth Electronics JV.
• Organizational changes directed at enhancing the product business with focus on ODM and consumer durable.