Once a celebrated multibagger, PG Electroplast Ltd is now navigating turbulent waters. The company's stock, which soared an astonishing 72 times between January 2021 and January 2025, has plummeted nearly 45% from its peak of ₹1,054 in less than a year. This dramatic reversal of fortune is tied directly to a sudden slowdown in air-conditioner demand, a critical pillar of its business, triggered by an untimely monsoon.
From Meteoric Rise to Sudden Stumble
Between the financial years 2021 and 2025, PG Electroplast was a dream stock for investors. The company's operating revenue exploded from ₹703 crore to nearly ₹4,870 crore, marking a compound annual growth rate (CAGR) exceeding 62%. Profits grew even faster, at a blistering CAGR of over 120%. This performance cemented its reputation as a poster child for India's manufacturing ambitions.
The company's deep integration model was key to its success. Acting as both an original equipment manufacturer (OEM) and original design manufacturer (ODM), PG Electroplast designs and makes room air-conditioners, washing machines, air coolers, and LED TVs for major brands. By controlling processes from plastic moulding to final assembly, it captured significant value across the supply chain.
The Weather Shock That Changed Everything
The turning point arrived with the summer of 2025. An unusually strong monsoon arrived weeks early, abruptly cutting the season short. For the AC industry, where timing is critical, this was a severe blow. Sales collapsed as rains began, leaving retailers with excess stock and halting new orders. The overall AC market contracted by approximately 25% in the first half of FY26.
For PG Electroplast, which derived close to 62% of its FY25 revenue from room ACs, the impact was severe. Its AC business grew a mere 2.5% in H1FY26. A modest miss in volumes had a magnified effect on profits because fixed costs remained high, showcasing negative operating leverage. In Q2FY26, net profit nosedived to just ₹3 crore from ₹84 crore a year earlier, despite flat revenues.
The company faced intense working capital pressures, leading it to discount receivables and incur around ₹20 crore in finance charges. Consequently, management drastically revised its guidance. For FY26, revenue growth expectations (excluding the Goodworth JV) were cut from over 30% to 17-19% (₹5,700-5,800 crore). Net profit growth projections saw a more drastic fall, from 40% to a mere 3-7%.
Valuation Concerns and Promoter Moves
Investor confidence took a further hit when promoters reduced their stake from about 49% to nearly 44% just before the demand downturn became apparent. Analysts have also flagged persistent cash flow weakness; over FY21-25, cumulative operating cash flow was only 24.5% of reported profits.
While the long-term story for India's AC market remains intact due to low penetration and rising incomes, the near-term narrative has shifted. The stock, which was priced for perfection, now trades at around 39 times estimated FY27 earnings, a valuation that appears stretched given current challenges.
The coming quarters will be crucial in determining whether this is a temporary seasonal setback or the beginning of a more fundamental reset for this high-flying manufacturing stock.
