Epack Durable Ltd Q3 FY2026 Concall Summary

Key Takeaways

• Revenue up 13.5% YoY, AC flat: Total revenue reached ₹427.8 crores despite a 1% YoY decline in the core AC segment, as SDA and components filled the gap.
• Diversification is working: AC dependence fell from 80% three years ago to 57–60% now, with a medium-term target of ~55%. The top 2 customers now represent just 38% of revenue, down from ~70%.
• Components surged 61% YoY: Growth came from PCBs, copper parts and plastic molded components, serving not just AC but also electrical meters, coolers and washing machines.
• Margins expanded, but net profit flat: EBITDA margin rose from 6.39% to 7.41% YoY; net profit margin contracted 5 bps to 0.61% on higher depreciation and finance costs.
• What to watch next quarter: Whether the promised 15–20% AC industry growth materializes in Q4 and whether channel inventory normalizes as expected, unlocking healthier production planning.

AC Segment: A Weak Season, a Strong Rebound Bet

• Industry hit hard: Primary AC sales degrew 25–30% in the first two quarters; secondary sales degrew ~15% initially, now running at ~10–12%. Unseasonal rains and high channel inventory drove the weakness.
• Post-GST recovery underway: Some demand recovery followed the GST reduction, and brands liquidated old BEE-rated inventory ahead of the December 31 production deadline.
• Channel inventory still high: Old BEE-rated products could be sold till end of June, so inventory overhang persists but is expected to normalize post Q4 FY26.
• Company targets 25–30% AC growth: Management expects to outgrow the industry's 15–20% CAGR through 2030, citing a robust current order book and a positive demand outlook for the coming season.

Ajay DD Singhania: "One of bad season does not indicate that the overall industry is not poised to grow."

Diversification: SDA, Components and Washing Machines

• SDA grew 30% YoY: Healthy order inflows across existing and newly launched categories, with air fryers gaining good traction. Nutri blenders also introduced this quarter.
• Components grew 61% YoY: Robust order pipeline across PCBs, copper parts and plastic molded components. Plastic parts like cross-flow fans now have approvals from almost all marquee clients.
• Washing machines ramping meaningfully: Top-load fully automatic machines started two quarters ago; two key new multinational customers acquired. Front-load and semi-auto machines planned to complete the product bucket.
• Revenue mix shifting structurally: RAC now below 60% of revenue. Management's medium-term target: AC at ~60–65%, SDA at ~12–15%, components at ~20%.
• Customer concentration falling: Top 2 customers down from ~70% three years ago to 38% in 9M FY26. Management considers 35–40% ideal and now focuses on increasing wallet share with existing marquee clients through cross-selling.

Ajay DD Singhania: "It is not a one way wherein we continuously keep on reducing because we also want to increase our wallet share with each of the existing marquee clients."

New Verticals and Product Launches

• Hisense JV facility ready: Construction complete, trial production on track, all key milestones achieved. Production to commence in Q4 FY26, initially manufacturing RACs for the domestic market, later expanding to exports (Middle East, GCC, Africa) and eventually front-load washing machines and TVs.
• Epavo backward integration progressing: New greenfield facility in Bhiwadi commenced trial production at period end. Will manufacture motors for AC, washing machines, fans and HVLS fans, supporting demand for energy-efficient BLDC applications.
• Two new products launching in Q4: Vacuum cleaners and tower fans. The company plans to launch one to two new SDA categories every quarter, targeting markets of ₹800–1,000 crores each with a 20–30% wallet share ambition over three to five years.
• SDA strategy is focused: Limited to 8–10 product offerings, each treated as a growth lever with horizontal and vertical deployment through backward integration and penetration of newer customers.

Margins and Costs

• EBITDA margin expanded ~102 bps YoY: From 6.39% to 7.41%, supported by improving product mix, better asset utilization and operational discipline.
• Net profit margin flat: Contracted 5 bps to 0.61% as higher depreciation and finance costs offset operating gains. Interest cost remained stable at ~₹13 crores per quarter.
• AC carries lowest gross margins: High-ticket AC has the thinnest gross margins; SDA, with lower ticket sizes, delivers relatively better gross margins. Management declined to report margins at a segmental level.
• Second price increase imminent: Management stated a second price increase is coming under current circumstances, though the exact effect on the current quarter will only be assessable after January–March stabilization.
• Medium-term margin target: Company confident of maintaining EBITDA margin of 7.5–8% in the medium to longer term.

Ajay DD Singhania: "Under the current circumstances, the second price increase is something which is imminent."

Capex and Capacity Expansion

• ₹220 crores spent in 9M FY26: ₹44 crores incurred in Q3 alone, primarily for capacity expansion and equipment installation for washing machine lines and the component segment at the new Sricity plant.
• ₹450 crores planned over next 12–18 months: Investment to support growth across segments, including the Hisense JV facility and Epavo motor manufacturing.
• Payable days reduced: Trade payable days fell because the company carried paid inventory with no new procurement in the last quarter, consuming leftover inventory from unseasonal rains.

Guidance & Commitments

Key Metrics