EPACK - EPACK Durable Limited Share Price

Management provided an outlook for FY27 indicating improved conditions compared to FY26, anticipating a growth of 15-20% in revenue due to favorable market dynamics and normalizing inventory levels. For the fourth quarter of FY26, revenue was Rs. 591 crore, an 8% decline year-on-year, while net profit stood at Rs. 2.4 lakh. On an annual basis, revenue dropped to Rs. 1,894 crore (down 12.7%) with an EBITDA of Rs. 113.9 crore, showing a 27.7% decrease.

Key forward-looking points include:

1. Customer Expansion: The company added 17 new customers in FY26, expanding its active customer base to 72, which is crucial for reducing concentration risk.
2. Diversification Strategy: Despite a 25% decline in the RAC segment, the Small Domestic Appliances (SDA) and Large Domestic Appliances (LDA) businesses grew robustly, with a year-on-year growth of 53% during Q4, supported by strong order inflows.
3. Capex Investments: Approximately Rs. 79 crore was spent in Q4 FY26 for capacity expansion in washing machines and component manufacturing.
4. Rajasthan Incentive Promotion Scheme: The company recognized Rs. 21.78 crore under this scheme, highlighting its commitment to enhancing long-term competitiveness.
5. CAPEX Outlook for FY27: Planned CAPEX of Rs. 170-200 crore will focus on capacity ramp-up and new product categories, reinforcing growth strategies.
6. P&L Considerations: Management emphasized a careful approach to recognizing PLI (Production Linked Incentive) benefits, evaluating performance against revenue growth targets, and reiterating steadfast commitments to long-term goals, including a target of reaching Rs. 5,000 crore in revenue by FY28 or FY29.

In conclusion, management conveys a strong stance on resilience and strategic growth, expecting operational performance to stabilize with improved market conditions in FY27.

Q&A Section Summary from EPACK Durable Limited Q4 FY26 Earnings Call

Q1: "Can you specify the cause of the PLI reversal?"
A1: The reversal was due to failing to achieve required incremental revenue growth despite making necessary investments. We responsibly recognized that our revenue shortfall meant we couldn't claim the benefits previously accrued for the PLI. We've engaged with authorities for clarification, and we're cautious in recognizing future benefits.

Q2: "What is the annual capacity for the Hisense front-load washing machine line and the expected utilization?"
A2: The Hisense facility in Sri City started operations in late March 2026. While AC production is scaling up, washing machine production is under trial, expected to commence by mid-Q2 FY27.

Q3: "Regarding inventory levels, how much is for Hisense JV startup vs. finished goods awaiting clearance?"
A3: Of our total inventory of Rs. 837 crores, about Rs. 50-60 crores is related to Hisense raw materials. A significant portion is tied to imported components built up to meet demand before new regulations kicked in.

Q4: "What's the current demand outlook for summer, and how are margins shaping up?"
A4: Demand is strong with recovery from previous inventory pressures. We expect a 15-20% growth in the RAC segment this Q1. However, cost inflation and recent regulatory changes have put pressure on margins.

Q5: "What CAPEX is planned for FY27?"
A5: We're planning a CAPEX of Rs. 170-200 crores over the next 9-12 months to enhance our facilities in Bhiwadi and Sri City, emphasizing capacity ramp-up and new product lines.

Q6: "What is the outlook for the Hisense JV and potential breaking even?"
A6: The Hisense JV, now operational, has seen a positive ramp-up in production and sales. Given the new capacity, we expect this FY27 to be significant for reaching break-even, building on increasing customer approvals and product development.

Q7: "What are the expected margins without recognizing any PLI or RIPS?"
A7: We anticipate normalized gross margins of around 13-14% and EBITDA margins of approximately 7%, targeting improvements as we ramp up our operational capacities.

Q8: "Is there any possible risk of inventory markdowns due to BEE transitions?"
A8: We do not hold any inventory of old BEE-rated products post-December 2025, as the guidelines prohibit it. Thus, we foresee no liability regarding markdowns from this transition.

Q9: "What is the current debt level and its expected trajectory?"
A9: Our current debt stands at around Rs. 700 crores, including a term loan of Rs. 200 crores. This is expected to stabilize, with some repayments and potential increases reflecting CAPEX efforts.

Each question answered reflects our operational outlook while maintaining a clear focus on long-term strategies despite the market pressures we currently face.