Target: ₹1,019
CMP: ₹649.80
PG Electroplast Ltd (PGEL) was predominantly a plastic moulding player. However, in the last few years, it strategically shifted its focus to products. It now envisions being an OEM/ODM solutions provider to consumer durables companies in India.
It has added capability and capacity for providing OEM/ODM solutions in air-coolers, room air conditioners (RACs), washing machines (WMs), and recently added LED TVs. Additionally, the company has PLI (product linked incentive) in RACs. Due to all this, PGEL is gaining wallet share and adding new customers.
We expect PGEL to clock profitable strong growth and market-share gain in ACs and WMs, and moving up in the products business, its valuation multiple will re-rate.
We expect its products segment to see exponential growth backed by RACs and WMs, with strong revenue CAGR of 91 per cent over FY21-24 in its products segment and significant market-share gains.
PGEL trades at 15.4x PE and 11x EV/EBITDA on FY24 numbers, much lower than Dixon/ Amber’s PE of 42x/33x. We expect its valuation gap with its peers to narrow, as over the next two years, it will show healthy revenue and earnings growth with market-share gains and improvement in return ratios.
With very strong revenue and earnings growth, and control on working-capital requirement, we expect OCF of ₹200 crore over FY23-24, which will result in OCF/PAT of 117 per cent in FY24.