Shares of PG Electroplast rose over 15% on Tuesday, after the integrated EMS player signed a definitive agreement with Spiro Mobility, an affordable electric two-wheeler company based in Africa. As part of the agreement, PG Electroplast will become an exclusive manufacturing partner of electric vehicles of Spiro Mobility in India.
Spiro is Africa's largest electric vehicle player with 20,000+ electric motorbikes.
Here is a look at what the new agreement entails and PG Electroplast's revenue and profit guidance for fiscal 2025.
New Partnership In Automotive Space
PG Electroplast operates in consumer durables, consumer electronics, bathroom fittings and automotives sectors. Its product offerings include air conditioners, coolers and washing machines as part of consumer durables. The company has a production capacity of 30 lakh units per annum for air conditioners and washing machine production capacity of 12 lakh units annually.
This new partnership is a key development for PG Electroplast as this agreement offers product diversification away from its traditional consumer electronic business.
Spiro Mobility is present in Africa and operates in countries like Benin, Nigeria, Kenya, Rwanda etc. They have two models in electric motorbike segment namely Ekon and Veo.
As per the exchange filing, PG Electroplast will be setting up and managing the manufacturing facilities. This will include manufacturing of electric vehicle, lithium-ion batteries and related components. Procurement of key parts and raw materials for the same will be as specified by Spiro.
Spiro will be responsible for research and development, marketing, sale, and distribution of electric vehicle products.
Also Read: EaseMyTrip Co-Founder On Plans To Expand EV Buses Fleet & Their Bet On Medical Tourism In India
Fund Raise
The board of PG Electroplast in an extraordinary general meeting on Nov. 13 had approved raising up to Rs 1,500 crore by way of qualified institutions placement to eligible investors through an issuance of securities by the company.
While we still await key details on the use of the funds, the company stated in its quarter two earnings conference call that it is not looking for any inorganic acquisitions. The company is also evaluating entry into one or two new categories in the consumer durable side of the industry only.
Capital Expenditure
Fund raise and capital expenditure are key for businesses and especially for EMS companies. For fiscal 2025, PG Electroplast has maintained its capital expenditure guidance at around Rs 370 crore to Rs 380 crore. Out of this, the company will use close to Rs 165 crore in the product business, for expanding the capacities and this will be for the plant and machinery in the product side of the business. The product side includes manufacturing of white goods like air conditioners and coolers.
About Rs 185 crore will be going into the acquisition of land and making of buildings, which is the infrastructure side, and the rest will be about Rs 20 crore for maintenance of capex.
This will also include some small capex on the plastic component side, especially on the sanitary wear, a new segment for the company.
Guidance Raised For FY25
Post its second quarter results, the company raised its revenue guidance to Rs 4,850 crore from Rs 4,250 crore earlier. This was led by the products business guidance raised to Rs 2,975 crore from Rs 2,650 crore earlier. It reported roughly Rs 2,000 crore in revenues in the first half of the year.
In terms of profits, the company is expected to report Rs 250 crore in profits and expects roughly Rs 30 crore in PLI benefits. H1 profits came in at roughly Rs 105 crore and with the expected PLI benefit, it expects to report roughly Rs 120 crore in profits and Rs 2,260 crore in terms of revenue. Another Rs 600 crore is expected to come in from its joint venture for television business.
Nuvama Retains 'Buy'
Nuvama retained its 'buy' rating on the stock, with target price of Rs 765. It increased this from the earlier target price of Rs 710 earlier. Strong performance in product business led by ACs in Q2 is positive. The company’s expansion and strategic investments in innovation are clearly paying off, according to the brokerage.
It expects the company to post a revenue/PAT CAGR of 29%/43% over FY24–27E and values the stock at 50 times price to earnings for December 2026.
On Tuesday, shares of PG Electroplast hit a life high, rising as much 15.17% before paring gains to trade 9.96% higher at Rs 686.5 per share around 11:30 a.m. This compares to a 1.31% advance in the Nifty 50.
The stock has risen 189.05% year-to-date and 193.82% in the last 12 months. Total trade volume stood at 4.3 times its 30 day average. The relative strength index stood at 61.98.
Of the seven analysts tracking the company, five maintain a 'buy' rating, one suggests a 'hold' and one recommends a 'sell'. The average 12-month analysts' consensus price target implies a 3.2% downside.
RECOMMENDED FOR YOU
PG Electroplast Partners With Spiro Mobility To Manufacture Electric Vehicles
Nov 19, 2024
Tata Steel's Ferro Alloys Unit Becomes The First In India To Publish Environmental Product Declaration
Nov 15, 2024
LIC Gets 'Overweight' Upgrade, Target Price Hike From JPMorgan On Strong Q2 VNB Growth
Nov 12, 2024
PG Electroplast Q2 Results Review - Another Stellar Quarter; FY25 Guidance Further Revised Upwards: Systematix
Nov 12, 2024
POPULAR