EPACK - EPACK Durable Limited Share Price

Management's outlook for EPACK Durable Limited indicates a positive trajectory despite facing some challenges in the industry. The company expects to maintain its overall growth trajectory, with an anticipated revenue growth of 20-25% for the upcoming financial year, particularly driven by diversification into small domestic appliances (SDA), large domestic appliances (LDA), and components. The management highlighted that the air conditioning (AC) segment is expected to account for about 60-65% of total revenue, which is a decrease from previous years, reflecting the company's successful diversification strategy.

Key forward-looking points from the management include:

• Revenue from operations for Q3 FY '26 was INR 427.8 crores, marking a 13.5% year-on-year increase.
• The EBITDA for the quarter was INR 31.7 crores, up 31.5% year-on-year with an EBITDA margin of 7.41%, up from 6.39% year-on-year.
• The company added two new customers, bringing the total customer base to 67, reinforcing its growth strategy.
• The washing machine segment is showing strong growth, projected to significantly contribute to revenue and margins moving forward.
• A robust order pipeline exists for components, with significant year-on-year growth in various categories, including a 61% increase in the components segment.
• Strategic investments of INR 450 crores are planned over 12 to 18 months to support capacity expansions in key areas.
• The management also noted that while they anticipated a 15-20% growth in the AC segment for FY '24-25, they are aware of the risks posed by commodity inflation and changing regulatory norms.

Overall, management is optimistic about continued growth and profitability through strategic diversification and customer base expansion.

1. Question: "As RAC now contributes less than 60% of the revenue, what specific initiatives are being taken to accelerate scale in SDA and LDA? Over the next 12 to 18 months, how do you see EPACK positioning itself to capture demand across Tier 2 and Tier 3 markets?"

Answer: "We are expanding our product portfolio in both SDA and LDA. We've introduced air fryers and nutri blenders recently, with plans for coffee makers and air purifiers. Our washing machine business, particularly fully automatic and soon front-load models, is also poised for growth. These initiatives position us well to capture demand in Tier 2 and Tier 3 markets, contributing to our strong growth strategy."

2. Question: "With EBIT margins improving over 100 bps year-on-year, how are you planning to balance cost efficiency with capital requirements for scaling SDA and LDA?"

Answer: "We approach capital allocation diligently, evaluating product-wise costs and returns before launching. We invest once we have validated products and achievable returns. Although we're expanding our portfolio, our increasing EBITDA margin reflects prudent financial management, ensuring profitability even during scaling."

3. Question: "What do you see for the overall AC industry, and how will the new pricing standards impact product pricing?"

Answer: "The AC industry faced a contraction in the past quarters but is gradually improving. Demand in Q3 showed a less severe decline. However, newly implemented BEE standards and rising material costs will likely lead to an 8-10% price increase across the industry, affecting all brands. For EPACK, we maintain margin protection due to our pricing strategy."

4. Question: "Can you provide guidance for revenue growth in FY '27 and the impact of the primary sales on order books?"

Answer: "We expect the AC market to grow 15-20% in FY '27 despite recent challenges. Our order books are robust, indicating a positive demand trajectory. We anticipate that our diversification strategy, particularly in SDA and LDA, will help sustain growth, even if AC growth is more moderate."

5. Question: "What is the expected contribution of AC in the upcoming year?"

Answer: "We foresee AC contributing around 60-65% of our total revenue, with SDA expected at 12-15%, and components around 20%. Although AC remains significant, our strategy aims to enhance the contribution of SDA and components over the coming years, reducing overall dependence on AC."