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PG Electroplast Probably Made Your AC 🔌

Did you know, that big brands like Samsung, Phillips and LG don’t actually manufacture electronics themselves? While they focus on R&D, creating brands and advertising, manufacturing is outsourced.

Everyone, from ‘makers’ of home appliances to mobile phones, is increasingly resorting to outsourcing their manufacturing - also known as Electronic Manufacturing Services (EMS). Today, more than 60% of AC brands outsource their manufacturing, from just about 30% 5-7 years ago.

With this trend catching up fast, these ‘brands behind brands’ have been gaining more than the fast-growing consumer electronics brands themselves. One such company is PG Electroplast, whose stock, over the last 5 years has zipped through the roof, with a 19x return.

Although the company has existed for the last 20 years, it is only in the last 5 years that PG Electroplast has truly transformed - with revenue going up 5x and profit after tax up 10x. But this isn’t the end of it.

The change in strategy has opened up an opportunity for PG Electroplast, which can continue to define its growth in multiples rather than percentages over the next few years.

The Pivotal Moment

PG Electroplast started off as a manufacturer of plastic components in 2003, producing plastic parts for consumer appliances. Basically, it made the outer coverings of consumer appliances, mainly ACs.

However, in 2018, it invested in and developed capacities to make components for ACs - heat exchangers, sheet metal components, copper tubing, etc, and by 2021, it was able to manufacture complete units of ACs.

This movement from plastic shells of ACs to components, and now full ACs is what has driven most of PG Electroplast’s recent success.

In less than 3 years of being able to manufacture full ACs, the company has already started manufacturing ACs for 14 different brands and has become the second-largest manufacturer of room air conditioners in India.

The change in strategy has resulted in revenue from room ACs growing by 14x in just 3 years. Room ACs now contribute to 48% of total revenue for PG Electroplast, from just 12% 3 years ago. The ballistic growth has been a result of:

  • Multiplied wallet share with existing customers for which the company was only making plastic moulded products earlier

  • Increased customers since the company can now deliver end-to-end solutions rather than just a few products

Room for Expansion

PG Electroplast has always been focused on ACs, even during its plastic moulding days. However, other than this, it also had a presence in air coolers and washing machines.

Similar to that for ACs, it has moved from plastic moulding to making full pieces (Original Design Manufacturing) for air coolers and washing machines as well.

Over the last 3 years, its revenue from air coolers has increased 2x and that from washing machines is up 5x. With more products being added to the portfolio, like the recent addition of Fully Automatic Top Load washing machines, revenue growth is expected to continue at levels seen in the last 3 years.

Additionally, PG Electroplast has also entered new segments like LED TVs, which multiply its addressable market even more.

Already, revenue from Products (fully made electronics) has gone up 9x in the last 3 years, from 23% of total revenue in FY20 to 62% in FY23. The growth rate seen in Products has the potential of continual given:

  • Strong momentum in room ACs

  • Relative nascency in air coolers and washing machines

  • Opportunities in new products like LED TVs


The change from being a plastic moulding company to an Original Design Manufacturer has resulted in a complete transformation of PG Electroplast.

The transformation in business that the shift from plastic moulding to product manufacturing has resulted in has also been reflected in the financial performance of PG Electroplast.

Not only has it resulted in an acceleration of growth, but has also improved profitability and return ratios.

Guidance for 30% growth in FY24

For FY24, PG Electroplast expects revenue to grow by 30% over FY23. A majority of the growth is expected to be driven by the Product business, which the management expects to grow by 43% YoY.

The company has several tailwinds in place, in the form of:

  1. Further maturity in the strategy of moving from plastic moulding to ODM resulted in more wallet share, higher market share, more customers and an expansion of the product portfolio

  2. Presence in high-growth products in the consumer electronics space, with the penetration of ACs at just 5-7% and washing machines at <20%, versus ~70% for TVs

  3. High growth of 32% CAGR is expected in the Indian EMS industry over the next 3 years, led by import substitution, supply chain realignment and the China+1 strategy

Additionally, a further boost to the industry is provided by government support in the form of the PLI scheme and Phased Manufacturing Programme (PMP) with benefits ranging across incentives for production, capex and local manufacturing, lower custom duties, and lower GST rates.

  • For PG Electroplast, PLI-linked incentives are expected to be Rs. 15 crore in FY23 and Rs. 30 crore in FY24

  • AC parts like controllers and copper tubing qualify for concessional customs duty and a lower GST rate of 18% versus 28% for complete ACs

Putting all this together, revenue for PG Electroplast is expected to see a 30% CAGR over the next 2 years, with a 47% CAGR in PAT. The stock is currently trading at a two-year forward PE of 25x, implying a PEG of 0.5x.

Theoretically, a PEG of below 1x would be considered undervalued given the high growth, transformation in business, and multi-year opportunity in the business.

From not having heard a whisper about this company to realising its true potential in becoming that brand behind the labels on your electronics, you must feel a bit betrayed but also excited! Amidst all the heat and red in everyone’s portfolios, this stock may just “cool” down your watchlist!

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