PG Electroplast Limited — Credit Ratings, 05-12-2024: Credit Rating- Revision

CRISIL Ratings has upgraded the long-term rating of PG Electroplast Limited to 'CRISIL A+/Stable' from 'CRISIL A/Positive', while reaffirming the short-term rating at 'CRISIL A1.' This upgrade reflects an improving business risk profile, bolstered by a robust revenue share of around 60% from the products segment and a strong market position as a contract manufacturer for consumer durables, particularly room air conditioners and washing machines.

The group experienced impressive revenue growth, with total income reaching ₹1991 crore in the first half of FY25, up approximately 75% from ₹1138 crore in the same period last year. Full fiscal 2025 revenue is projected to exceed ₹3500 crore, driven by rising demand for air conditioning in India. Operating margins have shown consistent improvement, moving from 8.8% in FY24 to approximately 9.8% in H1-FY25.

The financial health is on a positive trajectory, underpinned by a net worth boost to ₹1035 crore and a significant reduction in debt ratios. The projected gearing remains favorable, expected around 0.35-0.40 times for FY25, helping to maintain solid interest coverage of over seven times.

However, the company faces challenges, including intense competition in the consumer electronics sector and significant working capital demands, particularly as gross current assets have consistently ranged between 150-200 days.

Given the upward rating revision and strong growth outlook, investors may consider a buy position, while remaining cognizant of the competitive landscape and working capital management.