PG Electroplast (NSE:PGEL) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to PG Electroplast Q2 FY 'twenty seven Earnings Conference Call hosted by GM Financial Institutional Securities Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Charlene Chokshi from GM Financial Institutional Securities Limited. Thank you, and over to you, sir. Thank you, Anam. Good morning, everyone. On behalf of GM Financial Institutional Securities, I welcome you all to the q two f y twenty seven earnings call of PG Electroplast Limited.

0:56 We have with us the management of the company represented by mister Vishal Gupta, managing director, and mister Pramod Gupta, chief financial officer. Before we start off, a brief disclaimer. This presentation has been prepared for information purposes only and does not constitute a prospectus offering circular or offering memorandum and is not an offer or initiation to buy or sell any securities nor shall part or all of this presentation from the basis basis of or to be relied on in any connection with a contractor investment decision. This presentation contains forward looking statements based on the currently held beliefs of the management of the company, which are expressed in good faith and management's opinion are reasonable. The forward looking statements may involve known and unknown risks, uncertainty and other factors, which may cause the actual results, financial condition, performance or achievements of the company or industry to differ materially from those in forward looking statements.

1:54 These forward looking statements represent only the company's current intentions, beliefs or expectations, and any such statements speaks only as of the date on which it was made. The company assumes no no obligation to revise or update any forward looking statements. With this, I will hand over the call to the management for their opening remarks, post which we can open the floor for question and answers. Thank you, and over to you, mister Gupta. Thank you, Charlene, and good morning, everyone. Thank you for joining PG Electroplast q two FY twenty seven earnings call. I'm Vishal Gupta, the managing director, and I'm joined today by Mr. Pramod Gupta, our CFO and Mr. Vikas Gupta, our Managing Director of Operations, is also joining this call. Second quarter has planned out on expected lines, and we have seen good secondary sales in the room AC business for the industry, resulting in a strong order book for us also.

2:49 Our teams are gearing up for strong execution in second half of FY 'twenty seven. For the first half of FY 'twenty seven, consolidated revenues gross INR 2,950 crore for the first time in the company's history, and the room, AC and washing machine verticals posted their highest ever first half sales. Growth in first half came from combination of volume and price. We saw double digit volume growth and a similar quantum of ASP increase as commodity costs and rupee deposition got passed through to our customers. Our order book remains healthy across all product lines. I will let Pramoji take you through the numbers in detail, and then I will come back to cover our capacity road map and few other operating priorities for the current financial year. Pramoji?

3:41 Thank you, Vishali. Good morning, everyone. Consolidated revenues for the quarter was $9.34 crores, up 42.5% year on year. EBITDA came in at INR 69.14 crores versus INR 44.68 crores last year, a growth of 54.8% with EBITDA margin of 7.4%. Net income was 13.67 crores versus INR 2.76 crores last financial in the same quarter. For first half, product business has contributed 70.3% of sales revenue, growing 41.1% year on year. Within that, AC business saw growth of 36.2% to $15.61 crores.

4:31 Washing machine crossed INR 500 crores of sales and grew 60.7 percent for the first half. Cooler was muted at about 4.8% growth and contributed INR 19.3 crores. Electronic business has seen a very sharp growth of 90.3% and contributed 12% of revenues for the first half, and plastic molding and component contributed INR 5 and 21.6 crores and was up 7.5% year on year. Our JV, Goodworth Electronics, posted revenues of 6 and 23.8 crores in the first half versus INR 483.4 crores last year. And EBITDA stood at INR 22.7 crores versus INR 10.3 crores last year.

5:23 Our subsidiary, PG Technocast, which is obviously a part of consolidated sales, which I told above, reported 2,130 crores in sales this quarter this year in the first half. On margin, I want to clarify once again that gross contribution as a percentage has softened on a year on year basis, largely because of the pass through of the commodity prices, particularly copper, aluminum, plastic, etcetera, along with the rupee depreciation. And as you all know, on a per unit basis, margin remains stable, and we get a fixed amount per on a per unit basis and not the percentage margin for doing the contract manufacturing.

6:12 On balance sheet, things remain quite healthy. Cash and balance cash and bank balance stood at 422.5 crores, and most of the CapEx for this year is already paid for. Basically, CapEx payment that are not in gross fixed are either in CWIP or advances to suppliers. With this, I will now hand it over back to Vishal ji. Thanks, Pramodi. Let me cover some business outlook and our strategy along with couple of other developments for this quarter. Post our flagship washing machine manufacturing facility that came online in new campus in DMIC, Greater Noida, Uttar Pradesh last quarter. Our new campus at Salarpur Vivaldi is now operational, and we are consolidating operations by relocating some of our Greater Noida operations to this new facility.

7:09 This facility will have coolers, sanitary plastic components and mold making facilities. Second, on our refrater facility at City City in South India is progressing well. We are targeting commercial production as earlier committed in the last quarter of current financial year, with this becoming a meaningful revenue contributor for FY 'twenty eight. We have already tied up with our anchor customers, and we are in active discussions with other customers as well with some soft commitments already in place. The facility will have a capacity of 1,200,000 units and will start in Phase I with direct cool and side by side refrigerator and add Frost Free and Multi Door in Phase II. On compressors, also the projected Supa is on track for mass production in this financial year.

7:57 Things are progressing well. We expect our first 2,000,000 capacity to come online as planned in this financial year only. Alongside that, our strategic priorities for this year are R and D, new product development, backward integration, and capability enhancement. This all is aimed at building longer term resilience and improving capital efficiency. With that, we will now open the floor for questions. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question.

8:44 Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Saneja Shah from DAM Capital. Yes. Hi, sir. Good morning. Thank you so much for your opportunity. Sir, I have a few questions. First one being, we spoke about a double digit volume growth in AC. Maybe, you know, if you can help us understand how the industry sort of grew this quarter on a very unfavorable base versus how we've sort of done against that.

9:29 In this quarter, the primary sales have been muted. We don't see much larger, very strong growth. But secondly, sales as per the feedback what we are getting from the industry, first people, has been very strong. But, again, you know, if you see... If you try to compare this with the Y o Y basis, July, you can compare. August, there was an aberration because of the GST announcement was done. And then in September also, the sales started after September 22 only. But all said and done, still the secondary sales have been very strong in the channel, and channel inventory is on a much lower side as compared to last year. Yes, second quarter, we didn't see much action, but I believe that December quarter and March quarter, we'll see much better numbers for our company as per the feedback that we are getting from our clients and the kind of order book which we have been able to build up to maybe March, April for ourselves.

10:30 Oh, sir. And so you spoke about most of the prices being passed on to the customer. So if you could quantify the percentage of price hikes taken? And is it completely absorbed now by our customers? Or is there another round of price hikes which are due from our side? See, price hike has been an ongoing activity for us. The first price increase had happened in January of this calendar year, then it again happened in the month of April because it is normally done on a quarterly basis, and it has been done again in the quarter starting from this October quarter. And January quarter also, we are going to take a further price increase from our clients, which has been already aligned with most of the client. So with this price increase, second price increase, which will happen January 1 onwards, most likely, most of the price hikes, which should be factored until now, will be taken into account for.

11:30 Sir, I was asking from our second quarter perspective because I think we mentioned in a press release that most of the prices fees are complete pass has been passed through. So I just want to see that if the gross margin compression was also due to some bit of under absorption or is just as a function of, obviously, the ASP hike, which is optically making our gross margins look lower? See, first of all, gross margins as a percentage will always be lower in a high commodity price environment because we, as a contract manufacturer, typically get our margins or contribution on a per unit basis. That is point number one. Point number two, this quarter, which you have to keep in mind is that we had a very high growth in the electronics business. Electronics business has a much lower margin. That is one. And secondly, this quarter, the high growth was due to the rising prices of electronic components, semiconductors specifically, rather than very, very huge volume growth.

12:37 The reason this this has happened is because we do a lot of contract manufacturing and also we supply motherboards of TV, etcetera, where the memory prices have shot up very significantly. So because of those reasons, the... Because of mix change and because of high commodity prices, the gross contribution is lower for the quarter. But on a absolute price basis, per piece basis, we are in our usual range now. And as whatever price increases are required in the AC business till September, that we have been able to pass in... Pass on in October. And, again, whatever will be required in gen... Or gen...

13:22 For the quarter starting January, which will be based on the average cost of October, November, December, we intend to pass it from January 1. Sure, sir. Sir, the other thing what I wanted to understand was if you could help us with the incentives booked this quarter and a corresponding incentive number for the last year, same quarter. So this quarter, we don't have any PLI. PLI, book, as you know, on the basis of the sanctions received. And we are yet to file for the last financial year's numbers, PLI, this thing because there are GST audit, etcetera, just is getting completed.

14:10 So that number is likely to come probably in the Q3 and Q4 for us, and we will be reporting that number to you. That for the full year, this year, the PLI is likely to be close to INR 70 crore plus for us. Sure. Sure. And anything specifically booked apart from, you know, the PLI in this quarter? And, obviously, there is no PLI booking this quarter for any other incentives from a state perspective which we booked? PGEL, we continue to book about 1.55 crore rupees of incentive which we get for for the the Maharashtra government that has been booked.

15:03 Okay, sir. Okay, sir. Got that. Got that. I'll call back in the queue. Thank you so much for answering my question. All the best. Thanks. Thank you. The next question is from the line of from Nuama Institutional Equities. Please go ahead. Yeah. Good morning, sir. Thank you for the opportunity. Yes. Sir, if you could talk a little bit about how was the sales volume for RAC into? And if you could also help us with the corresponding number of last year 2Q? What is the expectation for FY 'twenty seven basis the current order book visibility what we have? We don't give the absolute numbers on a quarterly basis. On a full year basis, we are expecting about volume growth of close to 20% for the room AC business.

15:57 And as this year, on the quarter, if you look at Y o Y basis, the volume growth is not much in this quarter. It is very flattish. And but we have a very strong order book for the second half, and we are hoping to have about on a full year basis, about close to 2.1 to 2,200,000 kind of a number for room AC delivered this year versus 1.7 last year. Got it. And, you know, basically, price increase so far and the expectation of December and March quarter...

16:44 Excuse me. Now what would be the realization increase as of now, what we can expect on a YY basis, full year, average realization increase? Would that be north of 15%, 20%? It will be surely close to about 15% to 20% range. The average price increase across three, four quarters, you know, and what we expect in January quarter, all cumulative will be somewhere around 15%. 15%. Yeah. Got it. The other question I have, you know, this is more medium term question. You know, we have called out with respect to the rest, washer... Washing machines, etcetera. But any any thought on the additional growth avenues in terms of the segments, products, etcetera, if you could give us some sense, you know, or let's say, three to five year beyond the current products what we are currently looking at?

17:43 See, the immediate priorities for the management and top leadership team remains operationalizing these new projects, which have seen sizable CapEx in the last three years for us and trying to restore the profitability in the business to the levels. And we will be looking for growth opportunities, but right now, we do not want to focus on anything substantial till the time we have been able to, you know, scale up these these new initiatives which we are taking. And I think for 'twenty seven and 'twenty eight, the key priorities just remain to get these new projects on stream and the requisite profitability on them.

18:36 These are sizable CapEx projects which we have done, and we think that we can continue to see good volume momentum across the product lines which we are there, which is AC washing machine, refrigerator, and TV. And we do not intend to right now, you know, defocus on them and try to look for some other new opportunity. We are right now very focused on getting these new projects up and running and in a profitable manner. Fair point. Thank you. I have this last question, if I may, with respect to the complex scenario, if you could give us some sense, any further update from the previous call in terms of how it is shaping up for the industry? And also, know, another related question was in terms of the exports opportunity for RIT, anything we can look from the medium term perspective? Yeah. Those are the two questions. Thank you so much.

19:40 The compressor project, as I said in the call earlier, is on track. The machine installation is going on. The engineers are there from China who are helping in installing all those machines. And we are hoping that we'll try to start this trial production by end of November. We hope to start trial production by end of November. And I think by January, February, we'll be able to start mass production also, and there'll be a gradual ramp up. For calendar year '27, we are hoping that we'll do something around maybe 1,500,000 plus compressors. That is the target what we expect for ourselves, 1,500,000 plus.

20:25 And by April, May, we... If the season is standing out well, we might take a call on adding a second line also. In April, May, we'll take a decision on that also. And on exports, if you could help us understand Exports, sir, we are doing small number of exports right now to, you know, sharp nations, very small number. When you try to compete with China in Europe and America markets, the products are little different. They are quite different. And on the top of that, the pricing what they are offering in those markets in spite of the battery life duty benefits that we have because of FDA and all that, still that price disability is very large as of now. So it looks... As of now, it's a little challenging for our exports to these countries.

21:15 But, yes, part nations, we are doing small export, but those markets itself are very small. And, you know, nothing to talk about much right now. Products are there. Products are being developed. But whenever we do some kind of benchmarking, then the pricing becomes a major issue when we are talking about exports. Got it. Thank you, sir. I'll call back in the queue. Thanks. Yeah. Please. Thank you. The next question is from the line of Santosh Sahadri from Aventis Park. Please go ahead. Hi, good morning. Thanks for taking up my questions. So my first question is on the cost savings that you have achieved. There has been some considerable savings in employee costs and other operating expense line items. And so my question is, how should we think about it going forward?

22:09 Should we expect it at the similar levels or maybe a step up in the cost base given that many of the new projects, especially the compressor facilities are ramping up in the second half? So I'll take this question in two parts. Looking at the employee cost, obviously, we are running a tight ship, and we are trying to control that, but there is a growth there. But in the other operational expenses, manufacturing expense, there is a reduction y o y because of two reasons. One is that last year, had a forex loss of about 8 crores. And this year, we had a smaller forex loss of about $5.03 crores only. So there was a 5 crore that benefit that... On that account.

22:56 And also, last year, we had some one offs related to some GST, etcetera, which we took in the second quarter. And because of all those things, there was about INR 3 crore of additional cost, which we have not incurred in this quarter. So that is why the other expenses are looking the way they are. Going forward, as we ramp up the new facilities and the production in the existing facilities, obviously, the manpower costs and other expenses are likely to go up. But obviously, they will not be going in line with the sales growth because this year, there is a significant portion of sales growth which is happening because of the commodity pass through.

23:48 So there will be more the costs will be increasing more in line with the volume increases, which will be about 20%, 25% for on an overall company basis, and that is what is our internal target. Got it, sir. And as a follow-up on that, how should we think about the margins in the second half and going forward vis a vis the price increases that you are planning to achieve further? Second half typically is slightly better for us seasonally because there are obviously slightly higher sales and also operating leverage kicks in. Also, the way we book the PLI, the fourth quarter typically sees better margins. So we hope to have slightly better margin in the second half than what we have reported in the first half this year.

24:46 And just lastly, on the finance cost, can you provide some color how should we expect this going forward? Is there any room for optimizing working capital and bringing the finance costs down? So any color on that, that would be helpful. We are trying to work on optimizing the working capital. But actually, what is happening is because the high commodity prices, the the... Even with this optimization, the amount of inventory that you are requiring to keep is actually high, and that is leading to high investment in the working capital, leading to higher interest rates. We are trying our best to optimize wherever possible.

25:35 Hopefully, because all the CapEx has been paid off, only the working capital requirements will go up and we have some inventory. We are hoping that second half interest cost should not significantly increase from the first half interest cost. And that is going to be the focus area in the company in the second half. The next question is from the line of Bala Muruli Krishna from Oman Investment Advisors. Hi, sir. Good morning. Good morning. Regarding this new subsidiary, we have created a product. So do you have any plans for any other new products? What is the thoughts behind that?

26:29 No. We have not created any new subsidiary. We have a subsidiary which is actually already there, which is PG Technoplast. And PG Technoplast has a subsidiary called next generation manufacturing. So that structure remains. We have not created any new complete right now. Okay. And the inventory part, the the inventory levels are similar to last few weeks. Yeah. Inventory levels are slightly up. Yeah. The reason is because the... As I'm saying, we are having a a stronger order book in both AC washing machine electronics. And, therefore, we are keeping the material for those things. That is one. Second thing, as I explained earlier, the raw material prices are generally higher, and that is actually leading to despite keeping and optimizing on the volume side that is leading to higher inventory levels in the company.

27:30 We are trying our best to manage the inventory levels at our end, and we hope that in the coming quarters, if the commodity inflation is not high, then we should be in control of the inventory going ahead. So what could be the maybe rough breakup of SG and raw material on this payment? I'll give you this number. Just give me just give me some time. Just give me a couple of minutes. So if you have any other question, you can continue. I'll give you the the the recap of this in the meantime. Sure. Sure. From washing machine first, I don't think we have a good growth, like, 70% ROI.

28:16 So as we have got the new facility also commissioned. So on the year, annual basis, what what is the growth potential you're expecting in washing machine? We are looking at about 40 to 50% growth at least in the washing machine. Washing machine is now getting into maybe after a couple of months into off season, but we have seen a very strong growth there. We continue to to have a strong order book there, and we are likely to see for the full year the amount which I told you, about 45% to 50% kind of a growth. Yes, Okay. Lastly, on this, we have on POS mission for development also. Is there any update on that? Is there any progress?

29:12 I didn't get your question. Can you just repeat? POS mission is the payment. POS Yeah. You, you know, that business is not going ahead right now because there are some issues at the customer end. So it... There is no progress as of on that project. Okay. Sure. Thank you. That's all from me. Thank you. Thank you. The next question is from the line of from. Please go ahead. Yes. Just before that, I just before that, I I will like to give color on the...

30:03 Just a minute. Okay. You go ahead with your question. I'll I'll come back to you. Okay. Yeah. Yeah. Hello. Good morning, sir. Good morning. So we had talked about the super compressor unit starting. I just wanted to get an idea if, you know, the expected EBITDA margins post this post, I mean, obviously, the conditioning has happened. So, like, what are the EBITDA margins that we're looking at? See, because we are going to utilize large part of in house only for the in house, the thing. So I it will be a margin accretive. That number, we will share with you once we start the production probably in the second quarter sorry, at the end of third quarter.

30:55 Okay. Okay. Thank you, sir. That's it. Thank you. Thank you. Sir, you wanted to say something? No. No. I will come back to that inventory questions maybe slightly later. I'm just asking somebody to get that number. The next question is from the line of Dhruv Jain from Ambit Capital. Please go ahead. Hi. Thank you so much for the opportunity team. Two questions. The first question is on the electronics business. So you mentioned while raw material prices have gone up, and that would be one part of the reason. But if you could just provide some more color on what were the things that went right, what products did that, that's my first question.

31:50 I mean, there are basically three or four product lines on which we are currently working in the electronics business. One is the TV motherboards. Second is the AC controllers. Then we are also working on battery management systems and CCTV cameras. These are the four key products right now, which contribute bulk of the electronic business for us right now. We are seeing growth across all of them. And last quarter, we had a higher growth in the, basically, motherboards, TV motherboards, and because of the season. But in TV motherboard, the memory component is a significant portion, and the prices there have gone up very significantly.

32:41 So because of that, contribution in terms of sales looks much higher for the electronics business during the quarter. And that has led to very high growth in the electronics business for the quarter and the first half also. Sir, how should we look at the growth for the full year and for FY 'twenty eight in this vertical? This year, we are expecting a very high growth because of the pricing, as I said, and volumes are also decent in all the things. We should be having for the full year maybe around $5.50 to 600 crore kind of sales in this business on a full year annual basis.

33:39 Next year, we will let you know once we freeze our plans for for next year. Okay, sir. Got it. And so, sir, the second question is on incentives. So last year, you know, annual... As part of an annual report, we saw that you had booked about 130 crores of incentive. How... I mean, just wanted to get some clarity on that if it was clubbed for a couple of years. And for FY '28, so why you mentioned FY '27, my sense is still I did so more in FY '28. So what would be your incentive fee as part of the state government and TLIs? If you could just throw some clarity on that. Thanks. So so the way it will work is we will have our PLI incentive.

34:30 There are... Is in two companies, PG Technoplast and PG Electroplast. Sorry. MGM. MGM and PG Technoplast. So PG Technoplast, this is a last year for, basically, the sales, and, obviously, you will get that incentive next year. So we'll be booking the incentive next year. So we will have about 60 crores in PG Technoplast next year from that. In NGM, this is the... Because we applied in the third round, and there was... That should be valid only for the three years. So we will be getting a incentive for last year, which will be for this year. And this year, we will get for next next year in MGM, which will be there about 20 crores. Last... This year, we'll be getting 15 crores. And then, again, the last year, we'll be getting 20 crores, which will be in '29.

35:21 Apart from that, we will be having a state incentive, which will be the... To the tune of about 28 to 30 course every year, which will continue for next ten years in PG Technoplast. MGM, we have yet to file and the the government of Maharashtra's incentive scheme. We have committed close to 500 crores in the NGM, and that number should also help, and that will start probably after one one and a half year or two years once we start filing for that. So this is the way it is going to run. Okay. So just to say that, you your incentive for FY '28 would be anywhere between $105,110 crores.

36:09 Right. Right. Great. Thank you so much, sir. All the rest. Thank you. Thank you. You. The next question is from the line of Vedant Rathi from Blue Square Corporate Services. Please go ahead. Hello, sir. Thank you for the opportunity, and congratulations on your results. Sir, I just wanted to ask for regarding our CapEx guidance for the next year. And have we achieved all the the same? Plus, I wanted to ask on our capability with respect to our compressor plant in... Sorry sorry, our refrigeration plant in Sri City. Will we also be adding an additional compressor line in our Sri City plant as well? As far as the CapEx, Vinam, I'll take with two questions.

36:56 So CapEx for this year, which we have guided for around 400 crores, is on track, largely, the CapEx has been done, as said in his call comments earlier. And for next year, I think our idea is to consolidate the business right now and focus on the CapEx what we have done in last two years and try to build on those capabilities and grow that business. Still, FY 'twenty eight, we should do around 150 odd or 200 odd crores CapEx. Coming back to your question on electricity, the freighter plant that plant has told will start production in the last quarter of this financial year. For the refrigerator compressor, we are already discussing with couple of companies for that technology, but we'll take a call on that compressor facility decision after our refrigeratorcom...

37:48 Production is stabilized and we get a hang of the market behavior for this product, once we are very comfortable and confident, we might go for the refrigerator compressor also. Understood, sir. So just with respect to our refrigeration margin... Refrigeration business, how much can we see an approximate margin accretion because we are now manufacturing our refrigerator end to end as well? So, see, the margin profile will be similar to our current business, but we can give a definite color on this once, you know, after end of last quarter of this financial year, once our production stabilizes, we can give a better color on that, but it should be in line with our existing numbers at the company level. Yeah.

38:38 Thank you. Thank you. Thank you. The next question is from the line of Ravendranath Nayak from Nirmal Bank Institutional Equity. Congratulations for good set of numbers. Sir, you mentioned that, you know, while in the past half, we did around 36% growth in the RSE segment. So can you please tell me what is the volume growth in the past half? About 22 to 22%. 22 odd percent is the volume growth. Okay. So now you are guiding 30 growth for the full year... For this year, then we can expect that second half would be much, much better than the first half. So for the RHCs concern, is it right?

39:30 No. I am not guiding for 30%. I'm guiding that the volume growth should be 22, 25%. 20% plus minus 23% for the full year. That is what I'm guiding. And I think we have a very strong order book now. It is all the execution which we have to now do for the second half. Okay. So that means we can you know, cross around 4,000 crores in RFC this year or more than that? Yeah. That should be possible. Okay. And in washing machine, you know, you said that we will be. Can we cross around thousand plus this year? I will not say cross, but we will be near by that number.

40:16 Okay. And, sir, you you mentioned that electronics business, we did around the... This year, with significant growth of around from INR 80 crores to around INR $2.51 crores. So is it, you know, you mentioned that INR $5.60 crores guided for this year whole for the electronics business. Is it currently your guidance, INR $5.60 crores? I said 500 to 600 crores. Yeah. $5.50 is the number which we should target. This quarter was... And and in the first half, the TV contributes significantly to the electronics business, which is basically having a lot of TV motherboard, I will say. Motherboard has a memory component and memory prices have gone up significantly.

41:03 So it is a price appreciation, which has led to a high number in the electronic business. And now the electronic business in the second half is driven typically by the AC controllers and other businesses like CCTV, etcetera. So camera, sorry. So those things do not have that high memory content. So there, the volume growth will be much more normalized. The value growth will be much more normalized based on the volume growth. Okay. And, you know, if you see the good one of the joint venture, the growth has been spectacular from 180 crores to 5... 455 crores this year... This quarter, particularly.

41:48 Is it something to do with the electronics? Because as you mentioned, that the growth predicted... Is it related to some extent? That is largely driven by the TV business because deals largely in TV. And TV, as I... As you see, the prices have moved up very sharply because of the, again, electronics and motherboard, etcetera. So because of that, the the growth is also looking higher. Volume growth is in line of what we were expecting, but it's the pricing which has actually gone up significantly in the TV business this year. Okay. Okay. So good earth would be... You know, what would be the guidance for good earth for this year in terms of sales? Maybe around 900... 800 to 900 crores.

42:41 Okay. Okay. And sir, if we see then you're saying that second half would be much better in the RSC segment going ahead. And also the electronics business will actually contribute less in terms of this second quarter because second quarter, there is a decline in gross margin. You mentioned that in the initial call that due to the electronics component price, the margin is contracted. So can we expect the gross margin to improve in the coming second half if the RSU will dominate and electronics will take some base sheet in terms of gross No. See, the gross margins, even in the second half, on a percentage basis, may not look very high for the simple reason that as I told you the commodity prices are getting passed and we get money on the per unit basis.

43:35 The the bill of material for AC has moved from 14,000 rupees, which we used to have about two years back to almost 18,500 rupees now. While the amount of money which we used to get for making a AC remains the same. So as a percentage, that number may look less only. So that is the reason why the gross contribution margin or the gross margins may look lower. We actually focus on a per unit margin, which is an absolute amount. And there, we think we are comfortable, and we are hoping to see that money continuing. And we are trying our best to control our other expenses to make sure that our conversion cost remain low. So so don't look at this business as a percentage margin business at...

44:23 Because that is not the way internally we track. Okay. Okay. No. That's clear point. Sir, you guided them 800 crores of good work because in the past half, we were already done in our 632 crores. So At 800 to 900 crores, and see TV season is is little slow this year because of the very high price increase. And TV season is almost coming to an end. So we are not going to continue to see very high growth in the TV business in the second half, which is always the case. Typicals are typically low season. And as I was telling you that this year, increase is there because of that elasticity, price elasticity working negative. The volume growth is not so high in TV.

45:12 Okay. Okay. And the last question about the coolers, sir, we see significant big growth in the cooler. Is it a trend currently, or it is going to revive? How do we see the market in the cooler market? Because very See. You know? Last two years have been little unusual for coolers. First, we had a bad monsoon last year, and then there was a very high inventory in the channel, which was a low cost inventory. And this year, cooler, as you know, has a very high component of plastic injection molded component. Basically, has almost about 65, 70% of the bill of material is plastic and coolers. Now because the plastic prices went up very significantly, the raw material price for the cooler or the the bill of material of the cooler increased significantly. That led to channel not accepting the or taking the huge inventory of cooler, and they were working on basically getting rid of the inventory only earlier inventory only. Now this season should be a much more normalized season, And we think that coming season should see a decent growth for the cooler industry because the heat is increasing and the inventory levels are now normalized across the channel. And we hope that we will be able to pass on the price increase and the whole value chain will also be able to pass on the price increase.

46:40 Okay. And, sir, RAC, what is the percentage of price increase you're left with that so that we can cover actually to up to some extent a good amount of our cost? The prices, I see on price increase and commodity increases always a moving average. Whatever prices you have averaged for the last quarter is implemented for the next quarter. So it is always an ongoing activity. As we said earlier, we have already taken the price increase, which was required till now to maintain our normal margins. January onwards, we are expecting a further price increase, keeping in mind the commodity movement of this in this quarter. So OND, largely, we see that where the copper, aluminum and dollar is moving. Accordingly, we have a pricing mechanism with our clients, and we are able to do that with the clients.

47:35 Okay. Okay. Sir, one last question if I may allow to do that. So far, sir, there is a change in auditor, one of these subsidiaries, NextGen manufacturing. So is it there anything to look at in this... And what product this subsidiary is, you know, providing us in terms of services? We we have got a single auditor across the whole company now, which is BSRN company. And earlier, there was another auditor whose term has come to an end. And therefore, now from this quarter onward, which is q three onwards, we will have BSRN company across the whole company as a statutory auditor. Okay, sir. All the best, sir. Thank you very much for answering your questions. Thank you. Thank you. Thank you.

48:30 The next question is from the line of Keur Pandya from ICICR Prudential Life Insurance. Keur from ICICR Life Insurance. Congratulations on good numbers. Sir, two questions. First, R and C. Last year, Q3, we had a strong growth because of the shift in the inventory stocking. Now based on current channel inventory, you think that Q3 also will have a volume growth? Or what you are guiding for in terms of volume, all will be back ended towards Q4? We see some maybe kind of middle teens volume growth for us in third quarter also, keeping in mind the kind of volume or commitments that we are getting from clients as of now. And Q4 will be much better.

49:26 Sir, you mentioned early teens, right? Yes, kind of early teens. Yes. Okay. Okay. And just one follow-up on that. So if I just take base number of say 20% volume growth, I mean, on what you have delivered in say 1H, based on what is the channel inventory plus last year's base, very weak base of second half, you see any possibility of upside or I mean, it more conservative or there are the reasons for which you are keeping volume growth guidance a little lower? I mean, I thought 20% is lower versus being current scenario and on in the last year's base. What happens, Q3, even our financial year ends on March 31. So whatever growth will be there, we'll get transmitted to the FY 'twenty eight also.

50:21 So April, May is also always a strong primary sales month for people like us. So what we are guiding is something we I think we are not guiding any number. We are not seeing any number, but we will see a decent volume growth and much better value growth in REC in FY 'twenty seven and some part of that growth will get percolated to FY 'twenty eight. Understood. And just last question on newer categories, so say, ref and compressor. So where have you reached in terms of, say, approvals or validations? And should I mean, whatever, say, guidance or at least numbers that you are talking about for '28.

51:12 It takes care of that time line? First of all, for compressor, as I told, our trial portion will start in the month of November. End of November, we should have trial production. We'll be submitting our samples to our clients for compressor, and which is very similar to the designs which they are using currently. So we'll not see much challenge in approval. And largely, we will be using those compressors for our in house consumption. And as per our understanding with the clients, most of the clients, we need not go for their approvals also. If we are able to technically clear those compressors ourselves, we need not take their approvals. This is about compressors. We have already guided the kind of number of calendar year 'twenty seven. Should be anything between 1,500,000 to 1,800,000 is what we are targeting for next year, and we might take a call on the second line by month of April, May next year. Coming to refrigerator, we'll start trial production in January, February. The designs and the model selection has been done in consultation with our anchor customer.

52:15 The model which is being developed is in consultation with that client. So when the production will start, most likely approvals will not be a very big bottleneck as far as for that regulator is also concerned. And that is 1,200,000 in first phase. So 1,200,000 is the installed capacity for that, and I think FY twenty eight, we are targeting 700 k production, not more than that. That is the number we are trying to do in FY twenty eight. That is the kind of base number. Yeah, please. Understood. So that 700 k is a function of anchor plus to other customers or just based on anchor since the other customers is more of soft commitment then? This is this is on the basis of anchor customer plus soft commitments from other customers plus our experience and our gut feeling for this business.

53:14 Fair enough. Fair enough. Sir, thanks a lot, and all the best. Thank you. Thank you, Preeti. Thank you. The next question is from the line of Chirag Shah from White Pine. Please go ahead. Hello. Am I audible? Yes. Hello. Yeah. Thanks for the opportunity, and congrats for the number. My my first question is, clarity. With respect to inventory, if you compare with September 24 end, how would it be be today? You said 1.7 odd million, which is estimated inventory in the system today. How would it be versus September 24? Will it be lower? Will it be higher than September 24? That's what '24 numbers, I cannot recollect.

54:02 See, September 25, I can say, you know, it was much higher. But September 24 numbers, I don't recollect right now, sir Raji. Okay. Second is your 20% volume plus kind of indicative guidance. Does it take into account the so called expected rural, semi rural slowdown? And if yes, generally, how does this slowdown affects the RAC demand in general? So is it a big contributor to RAC demand and hence the impact is generally higher based on your past experience? How should how should we look at it? Sir, I'll be... First try to understand AC business. Whatever sales we do, it gets converted into secondary sales with a gap of two to three months. Right? Yeah. And the numbers we are guiding or telling you people in this call right now is the numbers up to March.

55:03 So up to March, we don't see much challenge as far as the primary numbers what we have been getting from our clients. Yes. Going forward, the way, you know, a Canadian economy is going to behave, I don't see... Still, you know, automobile and if you see two wheeler sectors, they are doing decently well right now also. So Yeah. Going forward, we'll come to know about that. But still March, I don't see much challenge in the numbers what we are getting. Anyhow, AC is not a rural product. AC is largely a urban product. And at least whatever sales we have seen in the last two, three months from whatever we are hearing from our clients, it looks like the momentum is pretty decent, and the industry itself is likely to clock more than 15% kind of a growth this year on a full year basis on a that is what is the estimate most of the brands have.

56:01 Why? Because generally tier three onwards, this rural urban definition gets intertwined, you know, in that sense. Yeah. So tier one, tier two cities is fair urban, you can say, but from Yeah. So, basically, we can... A large part of the industry volumes are driven by tier one or tier two up to tier two cities, maybe 70, 80%. Is that the right way to understand? Yes, sir. Yes, sir. At tier three also, you know, expansion is happening because you can see some kind of saturation happening in tier one cities in India Yeah. As well as these product categories are concerned. But, you know, all set and done, as as I told you earlier, you know, for us, primary numbers up to March are looking very... We are quite confident about those numbers. But how they translate into secondary numbers will come to know about the Yeah. Fair. Yeah.

56:52 Yeah. That's fair point. That's fair. That you can't take a call as of now, which I which I appreciate. And lastly, on compressor, just a clarification. So we are starting with one anchor customer. But in generally, how should one... Can this one anchor customer number can become four, five or the or the customer profile of EC gets converted to compressor, or there could be different tires that different EC customer could do for compressor? Given the way in this... The the industry requirements are there, right, to... For localized sourcing. The compressor, what we are making is largely for our in house consumption, and there is two one anchor customer in compressor. Right? We have a large variety of customers.

57:39 We have already given in principle approval for this product to be used in the RAC, which we'll make for them in our factories. Fair point. What I understood was how you clarified it then. I thought it's only for one and... One of the key customer for whom this... They better go ahead. Fair point. You clarified it. It. Great. Thank you. The next question is from the line of Pulawati Saikiran from Pulawati Finsov. Please go ahead. Sir, just a very broad question. Five years back, India's AC manufacturing was not very much backward integrated, and then PLI has come in across. And then now when we look back, how far we have come across and then that journey, how far we are there at the PGEL in terms of total manufacturing in of backward integration?

58:34 Thank you. Think it's a good question. Please understand, five years back, India started on this journey, and we are largely becoming from an assembly country to a manufacturing country. Barring electronic components, I think most of the things now will be manufactured in India, compressor, be it the compressor, copper tube, aluminum, which are the... And motors, which are the very large part of the BOM value. Electronic components, we do assemblies in India, but, you know, largely, all those electronic components are getting still imported from outside India. So that is one area which I don't see... We we we are not progressed very well as a country.

59:20 But copper tubes, aluminum and compressor and motors will be largely coming from India. So, yes, we expected this to happen little earlier, but there has been some delays. But this year onwards, FY '28 onwards, we'll see a very large production of these things happening in India, and largely people buy from local. So if you say in in case of compressor, the compressor imports are not allowed after 03/31/2027. So compressor has to be made in India, and the government has said that you can't import compressor after 03/31/2027. In case of copper tube also, government has now that copper import is not allowed. Copper tube import is also not allowed. So largely, people are buying from local sources also.

1:00:12 Got it, sir. And in third, how far... Now that logically, we understand that you are entering the electronic components. If you can explain PGEL journey as well, how well we are backward integrated? And one follow-up question is that in terms of compressor, manufacturing is happening in India, but the technology is also owned by Indians and then maybe in this case of a company as well. See, technology is, you know, I... This is a difficult thing to answer, but let me tell you, technology right now, we have acquired from outside India. But going forward, we believe that, you know, once we start manufacturing these compressors in India, in next two or three years, we will have that capability of developing these products in house only, these components.

1:01:00 Thanks also. This is really helpful. Thank you. Thank you. On behalf of GM Financial Institutional Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.