Epack Durable Ltd Q3 FY2025 Concall Summary

Key Takeaways

• Revenue surged 35% YoY, guidance raised: 9-month growth hit 77%, so the initial 50%+ FY25 target will be surpassed; the company now looks to close the year at INR 2,150 crores plus.
• Product mix shift is the margin story: AC dependence fell from 77% to 66% of revenue while the component business grew nearly fourfold QoQ, driving a 150% QoQ EBITDA jump and a path to 7.25%-7.5% full-year margins.
• Sri City is the drag and the unlock: The new plant sits at just 15%-20% utilization, depressing YoY EBITDA and PAT; management expects it to reach 50% by calendar year-end as delayed brand approvals now come through.
• Supply chain risks are easing, not gone: Copper QCO disruptions and compressor shortages are normalizing after BIS relief, but a fresh compressor disruption looms in June when some supplier certificates expire.
• What to watch next quarter: Whether Sri City utilization jumps as promised, the pace of washing machine mass production starting Q1 FY26, and any update on the Hisense JV stake approval.

Growth & Revenue Drivers

• AC engine still roaring: 9-month AC growth of 83%, with revenue already crossing INR 1,500 crores, 10% above the full previous year; order book for the season is extremely good and inventory levels are normal.
• Component business scaling fast: Revenue grew almost fourfold from Q2 to Q3, driven by outsourcing of high-value categories like Cross Flow Fans, copper tubular parts and controllers from all brand customers; contribution target is 12%-15% of revenue in 2-3 years, up from 6% currently.
• Export push beginning: Own manufacturing is delivering cost leadership versus China, and management expects much larger export growth within 3-4 years.
• Washing machine entry imminent: Trial production is complete, client approvals are expected by end of this quarter, and the full range of top-load fully automatic platforms will be ready by end of June; mass production starts Q1 FY26.
• Hisense JV adds OEM scale: A new AC facility is under construction with completion around end-July and OEM production starting by September; Hisense is waiting for construction to finish before initiating the process for a maximum 26% stake, subject to government approval.

Margin & Profitability

• Gross margin lifted by mix: The shift from ACs toward components improved material margin and EBITDA margin, with AC dependence down from 77% to 66% of revenue.
• Sri City is the PAT headwind: Increased expenses at the new facility are denting PAT; as utilization improves from 15%-20% toward 50% by calendar year-end, both PAT and overall margins will improve.
• FY25 EBITDA margin on track: Management guided to 7.25%-7.5% for the full year and looks to improve beyond 7.5% in the coming 2-3 years, though double-digit EBITDA is not being guided.
• Asset turnover target set: With an INR 850 cr gross block, peak revenue potential is INR 2,800-3,200 crores at 3-3.5x asset turn; washing machines and off-peak capacity utilization are the levers to reach 3.5-4x in 2-3 years.

Ajay DD Singhania: "double digit is something that we have not shared and we are not giving any guidance on that. But yes, we definitely look to improve it beyond 7.5% in coming 2-3 years."

Capacity Utilization & Operations

• Sri City lagging, but turning: The 12-month-old facility is at 15%-20% utilization because larger brand customers take 3-4 months to validate and approve a new plant; most key customers have now approved it, so a significant Q4 improvement is expected, with 55%-60% targeted within 3-4 quarters.
• Legacy plants steady: Dehradun and Bhiwadi are operating at 55%-60% utilization; overall RAC utilization is around 60%, with a target to reach 65%+ in the near term by using fungible capacity for washing machines and coolers.
• Fungibility is the utilization strategy: Except heat exchangers, most manufacturing capability is fungible across larger appliances, letting the company improve asset turns by filling off-peak AC capacity with washing machine and cooler production.
• R&D investment deepening: R&D manpower has grown rapidly to 80 people, roughly 10% of white-collar staff, with spend at 15%-17% of total employee costs; the company runs special skilling centers and Brazing Training Centers in manufacturing.

Ajay DD Singhania: "Every new facility is subject to an audit and approval by the clients."

Supply Chain & Raw Materials

• Copper QCO disruption hit hard: Domestic manufacturers who promised to set up facilities by September-October did not complete them, and BIS approval was not given to Chinese manufacturers; the entire industry faced a supply crunch. Some import supplies have now been granted BIS, providing partial relief.
• Compressor shortage normalizing: Last quarter's shortage, caused by China pushing exports to the US ahead of expected tariff increases, is now easing; sufficient domestic capacity from Highly, GMCC, Daikin-Rechi and LG is expected within 12-18 months.
• June disruption risk flagged: When some suppliers' BIS certificates expire in June, a fresh disruption is likely unless renewals are granted.
• Commodity and FX pass-through: Both raw material costs and exchange rate impacts are passed to customers via quarterly price revisions, so the P&L impact is not significant.

Ajay DD Singhania: "Compressor is something which is not directly or currently impacting the industry, but definitely June onwards when a few suppliers lose their BIS certificate unless a renewal is done, that will definitely lead to certain disruption."

Diversification & Medium-Term Bets

• AC dependence to shrink deliberately: Despite growing ACs above the 20% market rate, management expects AC dependence to fall from 80% to 60%-65% in 2-3 years as components, washing machines and coolers grow faster.
• Component contribution to triple: From 4% of revenue last year and 6% currently, the component business is targeted at 12%-15% in the medium term.
• EPAVO Motors scaling up: A new greenfield facility at Bhiwadi will be completed by end of Q1 FY26, targeting INR 150 crores in revenue for FY26 and aiming to meet first-year PLI targets.
• Refrigerators are a FY28 story: Other appliances like refrigerators are at least two years away.
• No compressor manufacturing: Management explicitly ruled out manufacturing compressors for ACs within the next 3-4 years.

Ajay DD Singhania: "Despite growing at let us say, above the market growth of 20% in AC, we believe that our overall dependence on AC on an annualized basis will come down from 80% to somewhere around 60%-65% in next 2-3 years, which essentially means that our small appliances, the new segment of larger appliances like washing machines and coolers as well as component business is deemed to grow at a much faster rate."

Guidance & Commitments

Key Metrics