After four years of blistering growth, PG Electroplast Ltd seems to be moving past its phase as a small-cap dream stock.
Between FY21 and FY25, the company’s operating revenue jumped from ₹703 crore to nearly ₹4,870 crore—a growth of more than 62% a year. Profit expanded even faster at over 120% compound annual growth rate (CAGR). The stock reflected this frenzy, rising almost 72 times between January 2021 and January 2025 to hit a peak of ₹1,054.
That momentum has since faltered. In under a year, the stock has fallen nearly 45% from its highs. To understand the reversal, it’s worth unpacking the business at the centre of the rally.
Deep integration bet
PG Electroplast designs and manufactures room air-conditioners, washing machines, air coolers and LED TVs for major Indian and global brands. As both an OEM and ODM, it controls everything from plastic moulding and electronics to final assembly. This backward integration helped the company capture value across the chain and fuelled investor belief that PG embodied the next phase of India’s manufacturing push.
In FY25, buoyed by strong demand, the management set ambitious FY26 guidance: around 30% revenue growth and nearly 40% net profit growth. But this optimism also reflected a heavy dependence on one category—room ACs, which accounted for close to 62% of revenue as of FY25.
Weather shock
The summer of 2025 ended abruptly, cut short by a stronger-than-usual monsoon that arrived weeks early. For the AC industry, timing is everything. Once the rains hit, sales collapsed. Retailers were left holding excess inventory and stopped placing new orders. As a result, the overall AC market shrank about 25% in H1FY26.
PG’s AC business grew just 2.5% during the period. A modest volume miss had an outsized impact: fixed costs stayed the same, compressing profits sharply. In Q2FY26, net profit fell from ₹84 crore to just ₹3 crore even though revenue remained flat—clear evidence of negative operating leverage. Working-capital pressures mounted too, leading the company to discount receivables and incur about ₹20 crore in finance charges.
In its Q1FY26 earnings call, PG Electroplast lowered its FY26 revenue guidance (excluding the Goodworth JV) from over ₹6,300 crore to ₹5,700–5,800 crore, cutting growth expectations from 30% to 17–19%. Net profit projections slumped from 40% growth to barely 3–7%.
Investors were rattled. The sentiment hit further turbulence after promoters reduced their stake from around 49% to nearly 44% just before the demand downturn. Analysts also highlighted persistent cash-flow weakness: over FY21–25, cumulative operating cash flow was only 24.5% of reported profits.
Valuation risk
Long-term fundamentals still look favourable. India’s AC penetration remains low, and structural demand should revive as income levels rise. But the near-term narrative has shifted. After years of flawless execution, the market had priced PG Electroplast for perfection.
The stock now trades at around 39 times estimated FY27 earnings, according to Bloomberg. Valuations look ambitious amid current business conditions.
For a business built on high expectations, even a small stumble has proved costly. The coming quarters will determine whether this is a temporary seasonal setback or the start of a more challenging reset.
