Epack Durable Ltd Q1 FY2027 Concall Summary

Key Takeaways

• Record quarter, margin optics flattered by PLI: Revenue hit an all-time high of ₹886 crores, up ~34% YoY, but the 203 bps reported EBITDA margin gain shrinks to ~15 bps like-to-like once the prior year's ₹13.31 crore PLI accrual is stripped out.
• Growth is broad-based, not just ACs: SDA/LDA revenue jumped ~60% to ₹130 crores, Hisense contributed ₹65 crores in the quarter, and the customer base now spans 72+ names across 19 categories, derisking concentration.
• Forex, not demand, is the margin culprit: The largest single margin hit came from a ₹6–7 crore forex loss; commodity increases pass through with a lag, but currency did not.
• Seasonal losses are the real problem to solve: Q2 and Q3 have historically been loss-making due to AC dependence; management's SDA/LDA push is explicitly aimed at neutralizing that bleed over the next 4–6 quarters.
• What to watch next quarter: Whether the PLI discount rollback with customers actually completes by year-end, whether Sri City utilization keeps climbing toward 55–60%, and whether front-load washing machine pilots start on schedule by end-October.

Growth Engines: RAC, SDA/LDA and Hisense

• RAC volume story: 44% RAC growth split into ~30% volume and ~14% value, with volume growth largely driven by the anchor customer, which management confirmed outright.
• BEE transition tailwind: The entire Q1 and prior-quarter growth is attributed to new BEE-rated products, since manufacturers were mandated to stop producing old-rated units from 1 January 2026; management estimates old-rated channel inventory has been largely flushed out.
• SDA/LDA scaling fast: Revenue grew from ~₹80 crores to ~₹130 crores (~60% growth) as part of the strategy to reduce seasonality and improve non-AC season utilization.
• Washing machines are the next lever: Top-load fully automatic machines are already in production for 3 large national/multinational brands; front-load pilot production is on track to begin by end of October, with mass production targeted for end of September/October.
• Hisense partnership delivering: ~60,000 ACs produced January–June, contributing ~₹65 crores revenue in Q1 alone; management expects cumulative revenue from Hisense to cross ₹8,000 crores over the next 5 calendar years across AC, appliances and washing machines.
• Component business is seasonal by design: Current components are largely AC-linked (controllers, cross-flow fans, copper tubing), so they track AC seasonality; the company is exploring non-AC component opportunities.

Ajay DD Singhania: "As Hisense continues to grow into a larger significant appliances brand in country in line with their vision, we believe that our growth journey with them will continue, and we'll scale new heights with them in the coming 2 years."

Margin Mechanics: PLI, Forex and the Rollback Plan

• PLI comparability distortion: Q1 FY26 carried a ₹13.31 crore PLI accrual with no associated cost, so it flowed almost entirely into EBITDA; stripping it out, prior-year underlying EBITDA margin was ~6.4%, making like-to-like improvement ~15 bps, not 203 bps.
• Forex was the single largest margin hit: A forex loss of around ₹6–7 crores was booked in the quarter; most commodity increases pass through after a time lag, but forex hit margins directly.
• Other expenses spiked over 50%: Driven by the forex loss plus higher wages, since sales and production value rose more than 35% overall.
• PLI rollback is now underway: The current year is the last year of PLI benefit available to EPACK; the company has already started rolling back PLI discounts shared with customers and is working to reverse the entire discount by end of FY27.
• Normalized margin expectation: Management says current ~6.5% EBITDA net of PLI is typical for the last couple of quarters; once the PLI discount reversal completes, next year onwards should see more normalized EBITDA.
• Commodity policy is conservative: No forward booking in anticipation of orders; back-to-back booking only for confirmed customer orders, with increases/decreases passed on in the next quarter.

Ajay DD Singhania: "We are winning share, scaling the top line strongly and near-term profitability is being held back by the investment cycle and increase in input costs rather than by weakening in demand or competitiveness."

Capacity, Capex and Working Capital

• Sri City utilization doubled: Improved from less than 25% previously to close to 50% in Q1, driven by ramp-up of non-AC business and a robust order book; management targets 55–60% annual utilization for Sri City and 60%+ overall across all three plants for FY27.
• Capex is largely done: Only ~₹10 crores booked in Q1; the bulk of the ₹450 crore plan is already booked, with an additional ₹60–70 crores expected over the balance of FY27.
• Depreciation has peaked for now: Q1 depreciation increased versus Q4 because new capacities were put to use; no significant upside expected for the rest of the year, with ~₹60 crores in CWIP to be capitalized in the next 2 quarters.
• Working capital is elevated but improving: BIS and QCO revisions forced carrying more than requisite inventory during peak season; levels are more comfortable versus last year but still slightly escalated, with working capital days around 50–60.
• Finance cost has room to fall: Increased ~₹3–4 crores due to scale and higher working capital; management sees opportunity to improve through inventory normalization.
• Andhra Pradesh is a longer-term story: MoU signed for ₹1,085 crores over 5 years with ~50% state investment subsidy; 35 acres allotted, but ramp-up is "not in the immediate term future, more of a longer-term future."

Ajay DD Singhania: "The ramp-up of Sri City is something which is gradually improving very fast. So compared to last year, we already see doubling the utilization -- the seasonal utilization at least."

Seasonality and the Path to Quarterly Profitability

• The core problem: Q2 and Q3 have historically been loss-making quarters because of heavy dependence on air conditioners; the entire SDA/LDA strategy is designed to neutralize that loss.
• The timeline: Over the next 4 to 6 quarters, management expects "bleeding situations" in Q2 and Q3 to come largely under control as SDA/LDA scales, with washing machines as a big lever.
• Inventory seasonality for SDA/LDA: Buildup is happening now because the festive season (October–November) is the selling season; thousands of SKUs make category-level channel estimates impractical.
• AC inventory is unusually clean: Industry finished-goods inventory is at one of the most comfortable levels ever; combined trade plus brand inventory is estimated at 0.35–0.4 crore units maximum, lower than the acceptable level.
• FY29 ₹5,000 crores target: Management says largely on track, working to minimize seasonality impact and achieve every-quarter profitability or maintainable revenue mix.

Ajay DD Singhania: "Q2 and Q3 historically has been the loss-making quarters because of heavy dependence on air conditioners. So the entire strategy around SDA, LDA is first to neutralize the loss... over the next 4 to 6 quarters, we should definitely see the bleeding situations coming largely under control for Q2 and Q3."

Customer and Product Diversification

• Customer base broadening: Now serving 72+ customers across 19 product categories, sharply reducing customer concentration even as absolute revenue from existing customers grew significantly; targeting closer to 75 customers and 20 product lines by end of FY27.
• New categories added: 3 new product categories added in Q1 FY27 alone; 4 more in the pipeline for later in the year.
• Customer additions continue: Roughly 2 customers added since FY26 close; 2–3 more product lines in pilot production.
• Disputed receivable unresolved: A disputed sales receivable of ~₹19 crores appears in notes and accounts; when an analyst asked if it relates to the AC business, the CFO asked for the question to be repeated and no answer is captured.
• Compressor strategy is partnership-based: EPACK is not looking at setting up compressor capacity in the near term; it will rely on strategic tie-ups with both large compressor suppliers. Domestic capacity is expected operational by end of December, largely in line with industry demand.

Ajay DD Singhania: "As far as EPACK's strategy is concerned, we are not looking at setting up any compressor capacity in near term. And we believe that we have strategic tie-ups with both the large compressor suppliers, and we will continue to harness our relationships with them."

Guidance & Commitments

Key Metrics