EPack Durable hosted a conference call on Feb 3, 2025. In the conference call the company was represented by Bajrang Bothra, CMD, Ajay D Singhania, MD & CEO and Rajesh Kumar Mittal, CFO.

Key takeaways of the call

Strong industrial tailwinds as well as addition of new customers across all segments powered 35% surge in Q3FY25 revenue. However, the EBITDA growth on YoY basis is lower because of higher cost related to the  new facility at Sri City which has not yet reached optimal utilization.

Product business has contributed 98% of total revenue in Q3FY25 and revenues from room AC segment contributed 66% of revenue, which has grown by 37% year-on-year. Despite growing at 37% in RAC, the overall dependence on RAC has reduced to 66%.

New Sri City facility is getting stabilized  and the capacity utilization at Sri City is gradually being ramped up. There is QoQ improvement in capacity utilization  as the company get up to meet customer demands with enhanced production efficiency to support the growing needs of key customers across multiple product categories.   And as the company reach optimal levels of utilization in the coming quarters, this plant will contribute considerably well to our margins. Lot of larger customers/brands take a lot of time to validate the facility and approve. So, it takes 3-4 months for the company to get the approvals on the brand customers for a newer facility and this has been slightly delayed. But the company is confident on significant improvement in utilization. 

By end of this calendar year,   definitely the Sri City facility, will reach its normalized capacity utilization to around 50% from current 15%- 20% utilization. And for this current fiscal year, EBITDA margins of the company would be around 7.25%-7.5% range. 

The company laid the foundation and commenced construction of its wholly-owned subsidiary at Sri City. This new subsidiary target to  start Hisense production of room ACs around Q3FY26 i.e. Aug-Sep 2025.   A maximum of 26% stake is what is under discussion with Hisense in this new wholly owned subsidiary EPACK manufacturing.

Update on other products - Washing machine is now in final stage of testing and the rollout will be in Q2FY26.  The lines for washing machine have been set up at Sri City plant and the trial production has already been completed since the beginning of the previous quarter. Currently, the company is waiting for a lot of approvals from its clients  and expect the approvals will be granted by end of this quarter.    Mass production of washing machine will commence from Q1FY26 and then looking to ramp up capacity in a phased manner to 100,000 washing machines/month in 2025-26.   And a more detailed road map in terms of the other appliances like refrigerators and all are definitely at least 2 years ahead i.e. FY28.   

Coolers - for the season, it is looking to produce anywhere between 60,000 to 70,000 coolers per month or an annualized number 2.5 lakh. 

Small appliances portfolio is expanded with air fryers in addition to the current portfolio of just Mixer-grinders and Induction Cooktops. Starting air fryers from the end of next month.

Supply constraints :  Supply chain definitely have impacted the industry even in Q3FY25.  Lot of disruptions in the critical raw material copper which kind of disrupted the industry. There was no local supply available, and the BIS approval was not given to the Chinese manufacturers, so that definitely impacted the industry. Currently, the BIS approval has been given to a few suppliers abroad which will help   normalize the copper requirement. Compressor is something which is not directly or currently impacting the industry, but definitely June 2025 onwards when a few suppliers lose their BIS certificate unless a renewal is done, that will definitely lead to certain disruption. Within next 12-18 months, sufficient compressor capacity will be developed within the country to meet the domestic requirement and hence any long term challenge is not contemplated. However in the short term, there are some challenges wherein the industry seek the government interference to grant further BIS licenses that is for next 12 months.

Maintain the earlier stated guidance of Rs 2150 crore plus in revenue for FY25. 

Annual capacity utilization (for both Dehradun as well as Bhiwadi) for AC is around 50%-55% similar to that of the industry. Whereas for Sri City, the annualized capacity currently stands at around 15%-20%.

The new Greenfield facility of EPAVO Motors, the JV of the company is being set up at Bhiwadi, which will be completed by the end of Q1FY26 (i.e. May/June).   So, currently, it will still continue its production at the makeshift facility in Silvassa.   Targeting to achieve revenue of almost Rs. 150 crores at the new facility for financial year 25-26.

Capes in AC business will be around Rs 220- 40 crores in next 2 years, the company has already invested around Rs 55-60 crores in first 9 months of FY25.

Total PLI amount would be around Rs 37 crores and out of that Rs 28 crores has been accrued in the first 9 months of FY25.

Diversification strategy, definitely will helping the company to improve its overall gross margins.

RAC market is growing at anywhere between 18%-20% in the near medium term for next 3-4 years.  EPACK definitely   will outgrow this number and   grow at a much better percentage in terms of AC RAC sales.

For 9mFY25 component sale stands at almost 6% of the total revenue up from 4% earlier. Look to increase it to 12-15% in next 2-3 years.  Exports currently is about 4% of the overall revenue in AC up from about 1-2% earlier . 

Of the total debt of Rs 490 crore TL is about Rs 60-70 crore.