PG Electroplast Ltd (PGEL) Q3 FY23 Earnings Concall Transcript

PG Electroplast Ltd (NSE:PGEL) Q3 FY23 Earnings Concall dated Feb. 06, 2023.

Corporate Participants:

Deepak Agarwal — Assistant Vice President

Vishal Gupta — Managing Director-Finance

Pramod Chimmanlal Gupta — Chief Financial Officer

Analysts:

Bala Murali — Individual Investor — Analyst

Karthik Jain — Individual Investor — Analyst

Vikas Gupta — Managing Director-Operations

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Pranay Roop Chatterjee — Burman Capital — Analyst

Teena Virmani — Kotak Institutional Equities — Analyst

Akhilesh Bhandari — ICICI Prudential — Analyst

Shrinidhi Karlekar — HSBC Securities — Analyst

Harsh Saraswat — Individual Investor — Analyst

Ashish Kumar Singh — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the PG Electroplast Limited Q3 FY ’23 Earnings Conference Call, hosted by PhillipCapital India Private Limited.

During this call, the company may make certain forward-looking statements based on the currently held beliefs of the management of the company, which are expressed in good faith and in the management’s opinion are reasonable. The forward-looking statements may involve known and unknown risks, uncertainty and other factors, which may cause the actual results, financial condition, performance or achievements of the company or industry to differ materially from those in forward-looking statements. These forward-looking statements represent only the company’s current intentions, beliefs or expectations and any forward-looking statement, speaks only as of the date on which it was made. The company assumes no obligation to revise or update any forward-looking statements.

[Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Deepak Agarwal from PhillipCapital India Private Limited. Thank you, and over to you Mr. Agarwal.

Deepak Agarwal — Assistant Vice President

Thanks. Good afternoon all. On behalf of PhillipCapital India Private Limited, I welcome you all to PG Electroplast Limited Q3 FY ’23 earnings conference call. Today we have with us, the senior management represented by Mr. Vishal Gupta, Managing Director-Finance; Mr. Vikas Gupta, Managing Director-Operations; and Mr. Pramod Gupta, Financial Officer.

Without taking much of time, I would like to hand over the floor to the management for their opening remarks, post which, we’ll open the floor for Q&A. Thanks and over to you sir.

Vishal Gupta — Managing Director-Finance

Thank you, Deepak. Good evening, everyone. Thank you for sparing your valuable time and joining this call today. Hope all of you are doing well. I’m joined on this call by Mr. Vikas Gupta, our Managing Director-Operations; and Mr. Pramod Gupta, our CFO.

We have already shared our results presentation earlier and hope you must have gone through that. Nine months of FY ’23 has been another milestone for PG, this significant growth over FY ’22 numbers. Revenue grew 121% and crossed INR1,320 crore, this products business leading the show with a 55% share. EBITDA increased by 153% and stood at INR103.5 crore and net profit rose 281% with INR37 crore.

Product business crossed INR720 crore in the first nine months of FY ’23, with room AC business contributing INR497 crores, which is a 431% year-on-year growth. The washing machine business for the nine months had a Y-o-Y growth of 80% with the company selling over 360,000 washing machines in the period. Order book for product business remains robust, and the company is on track to scale the product business significantly in FY ’23 and FY ’24.

This year’s capacity expansion projects have already concluded and begun mass production. Capex guidance for FY ’23 is being maintained in the range of INR135 crores to INR140 crores, and company has already doubled its washing machine, air cooler capacities while also further expanded room AC capacity to 200,000 indoor units per month, and 100,000 outdoor units per month. And the new PCB assembly facility for RC controllers in our Supa factory has also begun mass production.

We are also increasing our sales guidance to at least INR2,000 crore, which is a growth of 82% over FY ’22 consolidated sales and operating profit guidance of at least INR140 crore, which is a growth of 88% over FY ’22 operating profit of INR74.5 crores. PG’s new product offerings in washing machines and room ACs have received very good response from the customers. The company is focusing its efforts towards developing the products that helped maintaining cost leadership, while also striving for product leadership. Company continues to see increased interest for our business from new and existing clients and we remain very confident on the future growth prospects of the business.

With this now, I will hand over the call to our colleague, Mr. Pramod Gupta, our CFO to elaborate on the financials.

Pramod Chimmanlal Gupta — Chief Financial Officer

Good afternoon, everyone. I’m sure all of you have seen the financials in details already. We had a very good scale-up during the first nine months from operations point of view, the net sales for the quarter are up almost 75% at INR457.9 crores, EBITDA grew 114.3% at INR38.17 crores and PAT profit rose 148% to INR17.4 crores. During the period, operating margins have improved due to cost control also due to lower commodity prices and operating leverage, which affected the AC business especially.

On balance sheet side, I want to highlight that we have had a net increase of about INR1.36 billion, which was INR136 crores in the first nine months, largely due to completion of capex which was funded by the debt and also — partially by the debt and also increase in working capital. But increase in working capital has happened largely because we’ve pulled up some of the inventory for the strong AC season, which we are expecting and also because there was a murmur in the month of November, December that China will open up completely, which they did finally, and we were suspecting that it could lead to some problems later on, which did not happen incidentally. So we actually pulled up some inventory and that’s held back to some higher working capital during the last quarter.

I want to highlight here that, the debt increase has largely been on account of working capital debt. In fact, if you look at it from the — downturn borrowing has actually increased quarter-on-quarter by only INR29 crores, while the working capital debt has actually increased by almost INR68 crores during this quarter. And that is largely because of this inventory pulling up issue as well as very sharp ramp-up, which we had in the months of — In the AC business in the month of December. Also because, we are increasing the guidance to INR2,000 crores, we will be having a little higher than expected or initially budgeted working capital for the full year and that’s why the debt is looking higher, but we hope that, over the next quarter, the working capital cycle will improve further from here.

With this, I open the floor for question-and-answers.

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question is from the line of Bala Murali [Phonetic] from — I’m sorry is an individual investor. Please go ahead.

Bala Murali — Individual Investor — Analyst

Yes. Good afternoon sir. Congratulations on good set of numbers. So I would like to know about long-term view on the company over the four, five years origin, by agreeing that the industry will grow at significant rates. So what kind of position we can see the company in four, five years origin?

Vishal Gupta — Managing Director-Finance

Let me tell you, see for next four, five years, I can give you a very general statement in the sense that company has a very strong conviction in India growth story and India consumption as economy grows and the per capita income improves and purchasing power improves over people, the consumers. Then the products that we are dealing in, incidentally, the penetration levels are very low in India market and there is a very big and vast potential of the growth. So we see a very strong potential in the growth, which is actually supported by the government policies, where the government is not pushing for import, substitution and is ensuring that whatever is being sold in India has to be made in India.

So all these factors, import substitution, government policy supports, PLI schemes and the general growth in the Indian economy and the growth in the per capita and purchasing power of Indian consumers, will actually lead to a very secular growth for next four, five years, that is our strong belief. And that is why, company is preparing itself for this growth opportunity. Company is heavily investing in the capabilities and the capacities to take benefit of all such opportunities which may arise in future.

Bala Murali — Individual Investor — Analyst

Yes. That’s great. And one more thing I want to know about the FY ’24, any capex plans already made and any new products you’re going to introduce or any backward integration?

Vishal Gupta — Managing Director-Finance

In FY ’24, see, we will be doing a capex of INR125 crores to INR130 crores, that is a basic capex that we have planned right now. Company is looking at new product categories also as and when those projects materialize, we will further update the market on that as the capex guidance is around INR100 crores to INR150 crores for FY ’24, as and when new product categories or anything which is being discussed internally something prompts up, we’ll update the market on that.

Bala Murali — Individual Investor — Analyst

Thanks. And lastly, any revenue guidance for FY ’24 based on the capacity almost doubled for air conditioner and washing machines. So what can I expect?

Vishal Gupta — Managing Director-Finance

Yes. FY ’24 numbers are being worked up right now internally, it will take another three months — three to four months to firm up those numbers and we will be sharing those numbers — maybe in the June quarter, we will be sharing those numbers.

Bala Murali — Individual Investor — Analyst

That’s it. Thank you. Thanks a lot.

Vishal Gupta — Managing Director-Finance

Thank you.

Operator

Thank you. [Operator Instructions]. The next question is from the line of Karthik Jain, [Phonetic] an Individual Investor. Please go ahead.

Karthik Jain — Individual Investor — Analyst

Yes. Hi, Mr. Gupta. Congrats on great set of numbers. I have a couple of questions on…

Vishal Gupta — Managing Director-Finance

Can you be bit loud please, Karthik.

Karthik Jain — Individual Investor — Analyst

Yes. Is it better now?

Vishal Gupta — Managing Director-Finance

Yes, better.

Karthik Jain — Individual Investor — Analyst

Hi, congratulations on a great set of numbers. I have a couple of questions on the TV business. I think your TV business has grown significantly in this quarter. I think it represents about 12% of the overall revenue for this quarter as I can see in the presentation. So can you just put some more light on that business, how the growth prospects are? And how are you planning to increase that business?

Vishal Gupta — Managing Director-Finance

Vikas Ji, will you take this question?

Vikas Gupta — Managing Director-Operations

Yes, Karthik. So TV business is something that we re-entered only a year back, that business is not more than 12 months old for us. So we were at a small base in FY ’22 as compared to that to FY ’23, the definitive numbers are looking — the growth is looking impressive. But — because the base for the FY ’22 was very small. And going-forward, we feel that again, we are confident that in the TV segment as well, the business for us should grow, we are discussing with various clients, regional and national level brands for the TV manufacturing for them. So I think going forward the TV business will also grow in FY ’24 as well.

Karthik Jain — Individual Investor — Analyst

Okay. And regarding your AC business, so the majority of the capex that you are doing is for which product line, is it for the AC, is it for the coolers, is it for the TV units or — can you just give us some more details about where the capex is really going?

Vikas Gupta — Managing Director-Operations

See, the majority of the capex has been done for AC business and washing machine business. Out of the total INR130 crore capex till now, which we have done, almost INR90 crores is for AC business and about INR30 crores is — INR25 crores to INR30 crores is for washing machine and rest is for the other component.

Karthik Jain — Individual Investor — Analyst

Okay. Got it. Okay, thanks a lot and best of luck.

Operator

Thank you. The next question is from the line of Abhineet Anand from Emkay Global. Please go ahead.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Yes, thanks for the opportunity. First, I want to understand, what was our overall utilization in RAC part in that first nine months?

Vishal Gupta — Managing Director-Finance

See utilization is especially because, we do not maintain the utilization on a monthly or quarterly basis in the company, but I can tell you that — and in the mid — in the offseason, typically the utilization level falls very badly, and last quarter if you see for the whole quarter, the AC business had a total turnover of only INR50-odd crores, while this quarter, that has moved up significantly because of the month of December itself only.

And the current utilization levels till March are likely to be in the range of 85% to 90% in the AC business, but after March, we will be able to comment only how the tertiary sales actually take place. So on an overall basis typically in AC business 55%, 60% of the capacity utilization which is optimal as per our experience of last year that we see happen over a full year.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Yes, I understand that because of the seasonality the utilization will be low may be 50%, 60%, so what does that 80% 85% that you talked about sir?

Vishal Gupta — Managing Director-Finance

Right now, the utilization on the total capacity [Speech Overlap]

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

You were saying 4Q?

Vishal Gupta — Managing Director-Finance

Yes.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Second is. I mean, from your understanding on the RAC market, have you seen demand coming back majority of the brands still looking — what are they expecting in terms of the upcoming summer?

Vishal Gupta — Managing Director-Finance

See you know right now — as everyone knows right now it’s a primary sales, which is happening in the sales, the brands are pushing materials to their dealer and distributor network. Tertiary sales or secondary sales will start happening from the third or fourth week of March, then summer sales in the South India, it starts from there, South India. So as of now, people are expecting good season, good summers. But you know if green sheet [Phonetic] will come more together and we will have better picture once by third or fourth week of March mainly. But, as of now as industry as a whole is pushing for good growth this year.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

And in the AC industry from across brands we understand that looks to be slightly quite a bit of competition there. I mean, there are players which are probably trying to gain market share through aggressive branding, aggressive pricing, which has been prevalent for last few quarters. I mean as of now, you feel that situation is continuing or any subjectivity around that, if you can throw some light.

Vishal Gupta — Managing Director-Finance

See, we have — we can share our limited information on knowledge with due on that. But there are certain brands, who are aggressively pursuing market share gain strategy and when they are doing that, so they will have to be aggressive on prices and be aggressive on advertising and other things, so that they are able to increase their market share. That is there, so some brands are trying to do that. We are seeing that thing in the market.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Okay. And lastly from RAC itself of this around INR500 crore of sales in nine months, this consists of RAC plus components right?

Vishal Gupta — Managing Director-Finance

See, this is purely RAC sales.

Vikas Gupta — Managing Director-Operations

RAC product sale.

Vishal Gupta — Managing Director-Finance

Product sales. Yes.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Where does the components lie?

Vikas Gupta — Managing Director-Operations

Component lie in the plastic molding business.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Okay. Thanks sir. I’ll come back in the queue, if I have more questions.

Vishal Gupta — Managing Director-Finance

Yes, please.

Operator

Thank you. [Operator Instructions] The next question is from the line of Pranay Roop Chatterjee from Burman Capital. Please go ahead.

Pranay Roop Chatterjee — Burman Capital — Analyst

Hey, good afternoon to all present. Am I clear and audible?

Vishal Gupta — Managing Director-Finance

Yes.

Operator

Yes. You are.

Pranay Roop Chatterjee — Burman Capital — Analyst

Great. My question was regarding the washing machine segment. Firstly, apologies if I missed the volume number in the presentation. If you could just disclose — I think the volume is given, that’s great. Regarding the washing machine demand environment, if you could just give a few comments on how the demand is shaping up and how you are scaling up in the different segments, which is semi-auto versus auto. And any comments on your market share movement in the last quarter?

Pramod Chimmanlal Gupta — Chief Financial Officer

Yes. So Volume side, I’ll just clarify. The first nine months, we have done about 3.6 lakh volumes till now and in the third quarter, we did about 111,000.

Vishal Gupta — Managing Director-Finance

Yes.

Vikas Gupta — Managing Director-Operations

Okay. So when we talk about the forecast for the near-term period, I think, the market sentiment is looking quite strong the kind of forecast or the kind of a roadmap that we have from our clients. We see a sharp pickup in the demand for this washing machines from June onwards, typically the high season for washing machine starts with the vendor — with the onset of the monsoon and it starts picking-up the Diwali is one big season for washing machine sales then there is a sales happening during the winter also. So, it will start tapering-off from the month of December onwards.

So what we see as of now, we are in discussions with our client and we see a strong growth for the washing machine as we have already doubled our capacity that is based on certain assumptions on certain discussions with our clients, where we are seeing a further ramp-up of the volume with the existing clients, where we are seeing a increased share of wallet from their side and we have added quite a few new clients also as well.

Pranay Roop Chatterjee — Burman Capital — Analyst

Got it. And any — could you please give the volume of ACs in this quarter, IDU versus ODU?

Vishal Gupta — Managing Director-Finance

Yes. That I’ll just share with you, just a minute. IDU number is about 193,000 and outdoor unit number is about 62,000.

Pranay Roop Chatterjee — Burman Capital — Analyst

Great. Got it. And did you receive any state incentive this quarter?

Vishal Gupta — Managing Director-Finance

No this quarter — Just on the older investment in the parent company PGEL, we continue to basically receive the state incentive.

Vikas Gupta — Managing Director-Operations

See, we have — we are in the process of completing our investment in PG Technoplast the wholly-owned subsidiary in Supa, and we expect to — we already have a in principal approval from the Government of Maharashtra. We will make our application in FY ’24 after completing our investment and apply for those benefits. In the parent company, which is there for last many years, now in Supa only, we continue to get those benefits from the Maharashtra government.

Pranay Roop Chatterjee — Burman Capital — Analyst

Got it. And I have just one last question. You reported 7.8% EBITDA margins around — this quarter. Just wanted to check in case there was any one-offs in this margin.

Vishal Gupta — Managing Director-Finance

No. There is no one-off. Actually last quarter, if you see — we had a negative operating leverage of the AC business, because we had a small loss in the operating — in the AC business because of the seasonality. This quarter all the businesses had a profitability and operating leverage turn on the positive side in the AC business.

Pranay Roop Chatterjee — Burman Capital — Analyst

Got it. In case I can squeeze in one more question, your net debt is around INR470 crores right now by Q4 end would you expect it to go up or down?

Vishal Gupta — Managing Director-Finance

No. We have already given a guidance for the full year, debt is likely to be probably in the same range or maybe INR10 crores, INR20 crores plus, minus I’ll say. The reason is that, we are having a very high inventory levels for the season and we actually are hoping that, receivables, we will be able to control, most of the capex is already done. So the working capital loan should probably be in the same range. And we do not foresee any increase in the term loans.

Pramod Chimmanlal Gupta — Chief Financial Officer

See, what happens because of the last quarter we have such a sharp ramp-up in our sale, so working capital or numbers been little tweaked. In fact by June quarter — June end, those numbers will start normalizing. So, but in March end numbers, you will see at the similar levels, that we are seeing, right now.

Pranay Roop Chatterjee — Burman Capital — Analyst

And do you see an increase in interest cost, would that have contributed?

Vishal Gupta — Managing Director-Finance

No interest rates, we are getting our market rate only about 9% in the cost of borrowing. And then obviously, the Bank rate increases, then we will see probably some increase.

Pranay Roop Chatterjee — Burman Capital — Analyst

Got it. Great. Thanks a lot for answering my questions. I’ll be back in queue.

Operator

Thank you. The next question is from the line of Tina Virmani from Kotak Institutional Equities. Please go ahead.

Teena Virmani — Kotak Institutional Equities — Analyst

Hi, sir. My question is regarding the pricing strategy that you mentioned about certain brands which are exist-ably pursuing this market share gains. Now this could be a near-term scenario that we may see. But how do you see the long-term realization moment for both, even the AC players and the ODM players moving out, given that there is a scope in the industry also to grow and everybody is also expanding capacity? So how would the situation pan-out over a slightly longer period of time when the capacities are in place and realization for both AC players as well as ODM players like you and other players in the industry.

Vishal Gupta — Managing Director-Finance

So, Hi Teena. So, you’re trying to put up two questions. How the brands are going to play in next two, three years, and how a ODM people like us are going to play in next two, three years once the capacities are engaged and they’re fully operational, right? So see it will be very difficult for us to clearly answer the questions from the branch perspective, but as per the information or the knowledge that we gather from the industry people, there are certain brands, who have a very aggressive market share gain strategy. That is why they are pursuing a bit aggressive pricing, and they hope to follow that for at least this season they’re hoping to follow this strategy.

In case of ODM players like us, being a seasonal business, I will tell you, it’s very, very evident the brands, the people who are putting up their factories and some brands are also putting up their factories and some ODM players are also expanding their capacities. But, being seasonal in nature, the pricing, there is not much of the pricing play in the ODM sector, in the sense, because when customer, clients are buying a product of INR20,000 from any ODM player. So, anything in a INR100, INR200, INR300 difference doesn’t make much of impact to them, they are actually focusing more on timely delivery and quality. So quality and delivery is very, very important.

Cost is exactly — not exactly means it’s an industry given, it’s an buyer’s market, it’s not a seller’s market, we agree on that, but let me tell you that INR200 INR300 on a INR20,000 product doesn’t make much of a difference, provided your customers can derive comfort from your capabilities of delivering a quality product on their time, as and when they want and the flexibility is there. So it’s very — I can’t answer this question in a very simple manner, so that is why I have given — giving you this explanation.

Teena Virmani — Kotak Institutional Equities — Analyst

So, even on a longer-term basis also this may remain less similar to what all the ODM players are currently getting from the brands.

Vishal Gupta — Managing Director-Finance

So, Teena, I will tell you, what strategy as a company, we are trying to follow. We are trying to follow a cost leadership. We are trying to — the plant that we have put up in Supa is the most backward integrated single location plant and one of the largest single location AC manufacturing facilities in India right now. The basic idea is to derive cost leadership from all the synergies, if you are making all components in-house and you are not doing — you are not spending money on factory and forwarding of those components to make AC. That is one thing. That is what we are trying to do right now.

So if we are able to drive cost leadership at one point. And second point, what we believe as a team, what we tell our team members. Actually, we are not selling any product, we are selling a service, but what product we are offering is not much different from the product being offered by our competition. But what can differentiate us from our competition is the kind of delivery or kind of service we are able to offer to our customers. And that is why we are able to increase our market share in this competitive scenario because of the service aspect of this business, that we are trying to highlight.

Teena Virmani — Kotak Institutional Equities — Analyst

Okay. What could be your current market share or maybe FY ’23 closing market share approximately in the — among the ODM players if one were to analyze that?

Vishal Gupta — Managing Director-Finance

Teena, I won’t like to speculate on those numbers, because it’s a very early — it’s a second year of operations only for us. So. I don’t think — we will not be in the right position to answer this question right now.

Teena Virmani — Kotak Institutional Equities — Analyst

Got it, sir. No problem. And one last question is on the incremental margin benefit that can come through from your new capacities which are primarily led by the PLI capex. So without taking into account any PLI incentive, what could be the data gain and margins that you can accrue from this entire backward integration expansion that you already have done?

Pramod Chimmanlal Gupta — Chief Financial Officer

Margins are likely to be largely in the same range as they are, because some of the benefits that we have earlier talked about of backward integration are largely there. And we don’t focus so much on the margins per se, although, we are as Vishal ji explained, we have a clear focus on cost leadership, the whole focus of the organization is to actually increase the throughput and actually come — have a much better asset terms.

So actually I keep on telling this to all the investors and I’ll repeat again for the benefit that, in our business margins are actually an outcome of many of the things, one of the very big important thing is actually the commodity prices during that time. Now in this quarter, we had slightly lower commodity prices that actually are helping the margin percentage. Although, whatever money we get to make an AC as our gross contribution is actually very similar to what we were getting last year or in the last quarter that has not changed.

Second thing is, if we can actually increase our asset terms and do more throughput from the same plant, that is actually going to let us make — actually give us much more advantage than actually focusing probably of 10 basis point, 20 basis point of margin and that is what has been our strategy. If you look at our — in our case, we have probably invested close to till now INR200-plus crores, and in the very second year, we are expecting a turnover in the AC product business of almost INR900-plus crore which is a asset terms of 4.5, which we think is very, very good in manufacturing — contract manufacturing business like ours.

And that has been our strategy on the — all the product side, where we are working only and focusing to increase the asset terms or asset throughput to improve our ROC and not actually very, very focused on the margin percentage per se.

Teena Virmani — Kotak Institutional Equities — Analyst

Okay. And if — as and when your other segments apart from washing machine also when they start expanding — for example like TV, if it expands, then probably your asset term can improve further.

Pramod Chimmanlal Gupta — Chief Financial Officer

Yes. So TV actually is a very small business as of now for us only this year we’ll probably do close to INR150-odd crore. As and when TV and washing machine — but then the overall asset term in the company, and therefore, the ROC see a further improvement going forward.

Teena Virmani — Kotak Institutional Equities — Analyst

Got it, sir. Got it. Thank you so much.

Pramod Chimmanlal Gupta — Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Vaibhav from ICICI. Please go ahead.

Akhilesh Bhandari — ICICI Prudential — Analyst

Yes. Hi sir, Akhilesh here. So firstly, you mentioned that for the full year you expect the net debt number to broadly remain at the current level, INR10 crores or INR20 crores, perhaps slightly higher. So what is your assumption regarding the receivable level at the end of the year? Because what we have seen in the last two years, especially, is that the receivable in terms of number of days also goes up in the last quarter, so what is that assumption which you are making?

Vishal Gupta — Managing Director-Finance

See, what actually happens is, in the last two years it happened was that fourth quarter was a very big quarter in comparison to [Technical Issues] and that also happens because of seasonality, hello

Operator

Yes, sir. You are audible. Go ahead.

Vishal Gupta — Managing Director-Finance

Yes. So, that happens because of the seasonality and as — in last two years, the first half in both the years got [Indecipherable] because of the COVID issue. This year that challenge is not there. Although, nonetheless, the fourth quarter is going to be relatively larger, we have given a guidance of almost INR680-odd crores in the fourth quarter with INR1,320 crore in the first nine months. But nonetheless, it is not as skewed as last year or year before that. So, overall on a monthly basis, we don’t see that kind of a shoot up, which happened in the previous two years. So those numbers will not look that acute in terms of days receivable.

But nonetheless, I will tell you, what happens is that monthly run rate has actually significantly changes in the fourth quarter. So in the first nine months, if you see our monthly run rate is of the order of about INR140-odd crores or INR145 crores, and now we are expecting close to something like INR230-odd crores of a rate in the next three months. So, obviously, this run rate leads to about — even if you assume 45 days of working of a receivable situation then INR230 crore x 1.5 that will come to something like the — INR345 crores or INR350 crores is the kind of number which you will see on the payable side, but we are working towards many aspects, so that to control our receivables as well as inventory and hope some of those things will actually work out.

Akhilesh Bhandari — ICICI Prudential — Analyst

Okay. So you remain confident that if — let us say, we have reported around 40 — or almost 50 days of receivables at the end of the current quarter, so that will go down to around 45 days.

Vishal Gupta — Managing Director-Finance

Yes.

Akhilesh Bhandari — ICICI Prudential — Analyst

Okay. And sir, I don’t know if I have missed this, if you have already given it. But what is the volume for the LED TVs, I know it’s a small part, but what is the volume in this quarter?

Vishal Gupta — Managing Director-Finance

Just give me a second I’ll let you know.

Akhilesh Bhandari — ICICI Prudential — Analyst

Yes. And sir, in the meanwhile, if you can also speak about the customer addition in washing machines and LED TV business which you are expecting?

Pramod Chimmanlal Gupta — Chief Financial Officer

So we don’t disclose individual client names in our customer list. But we are on the verge of adding two very large customers, national brands, which one of them has already going to start mass production in this month and one more customer product approval is already completed and we expect to start productions in the month of April for that large customer also, in case of washing machine. In case of TV also we are discussing with lot of customers and we are trying to add those customers, as and when we are developing our ODM products in TV category now. So we’ll be adding some more customers, but right now, we would not be able to disclose the names right now.

Akhilesh Bhandari — ICICI Prudential — Analyst

And sir, in washing machine, the customer addition, the two national brands which you spoke about, this will be for the semi-automatic category?

Pramod Chimmanlal Gupta — Chief Financial Officer

Yes, sir.

Akhilesh Bhandari — ICICI Prudential — Analyst

And sir, based on your guidance, so you’re expecting the full year margin to be around — at the EBITDA level to be around 7%, so is this a sustainable level which should assume or do you think this has further scope to inch up in FY ’24 and FY ’25?

Vikas Gupta — Managing Director-Operations

Yes. So coming back to your TV question, this quarter we had about 40,000 volumes in the TV in the quarter in the sale. And actually margins and the outcome of many things and how the — in the quarter, what is the mix of the segments that also, decides the margin apart from individual segment level margins. So it’s always very difficult to pinpoint the margins in the quarter. But we hope that because of the improvements in the revenue outlook across all the segments, the margins should be slightly better in the coming quarter in each of the segments. But final margin will actually — totally depend on the overall mix and that mix, we don’t know as of now, today, it will actually be visible to us only in the month of — by the month of — end of March.

Nonetheless, because of the scale initiative and also because of the operating leverage, we are very hopeful that margins in the coming quarter will improve further in the each of the segments.

Akhilesh Bhandari — ICICI Prudential — Analyst

Got it. And sir, by the end of next year, what kind of debt reduction you’re expecting overall from the current level?

Vishal Gupta — Managing Director-Finance

I’ll tell you, very frankly, if we do not add any new product segment, then we should see some amount of debt reduction surely next year. But we are actually considering some new products and if we take any decision on that, then we will have to do some capex — further capex on those new product line. But in the existing product line, as of now, whatever the business plan is there, we think INR130 crores plus/minus INR5 crore, INR10 crores of capex is going to be there, same as this year. And next year, our EBITDA and other income should be significantly higher than this year and that should help us to actually do some debt reduction for sure. Those numbers, we will be able to share with you once we finalize business plan for the next year at sometime in May, after the fourth quarter results.

Akhilesh Bhandari — ICICI Prudential — Analyst

Got it. Thank you, sir. I’ll get back in the queue.

Operator

Thank you. The next question is from the line of Shrinidhi from HSBC. Please go ahead.

Shrinidhi Karlekar — HSBC Securities — Analyst

Yes, hi. Thank you for the opportunity and congratulations on good set of numbers. Sir, I have a question on margin first. If I look at your margin at about 7%, it looks very impressive, particularly given that one of your close peer member has reported quite a weak margins. So in assessment, what is really driving the superior margin for PG Electroplast given the size of the company is smaller?

Pramod Chimmanlal Gupta — Chief Financial Officer

Yes. As we — Vishal ji has been telling that we worked a lot towards cost leadership. And also please appreciate, we are a multi-product company, and we have a wider portfolio, which allows us to whether the seasonality business — seasonality of these business is much better, and therefore, the operating leverage that actually works into the negative and the off season is mitigated to some extent in the portfolio because of the other products helps us to actually report slightly better margin. But I think on an overall products business margins for our number EDs must be in the same range, this is my guess, best guess at least in the season. In the off-season, actually because of the operating leverages that play-out for different players because of the portfolio of products, they may have a different impact. And that is one of the reasons, because of which probably we gave a reporting slightly better margins.

Shrinidhi Karlekar — HSBC Securities — Analyst

And sir, you also highlighted that you’ll probably have a largest single location manufacturing plants for AC and probably closer to ports. Just wondering how much does that help in terms of having a better cost economy.

Pramod Chimmanlal Gupta — Chief Financial Officer

So, it does surely help. But more important than the nearest to the port, it is actually the single location and having all the units for all the components with the single location and under single roof, actually that leads to little bit of saving in terms of transportation, logistics, as well as the the packing and some of the other costs, which in our opinion, maybe it is [Indecipherable] 0.4%, 0.5% [Phonetic] at best.

Shrinidhi Karlekar — HSBC Securities — Analyst

Right. And one more question from my end, again on margin. So if you look at your guidance of about 7% margin in FY ’23, may I ask, how is it different between product business and your rest of the business?

Pramod Chimmanlal Gupta — Chief Financial Officer

So I’ll just give you some basically, broad ballpark margins on each of the segments that we have. And this is what we have seen over a slightly longish period of time. Typically, the product margins are between 7% to 8.5% depending upon the mix of the products, washing machines slightly — have a slightly better margins than AC, and actually cooler has the best margins. Cooler margins are almost in the double-digits, lower double-digits, but coolers is very highly seasonal, it is only a four month product. And it’s a very small segment for us now.

In the plastic molding business, the margins are 7% plus/minus 0.4%, 0.5% is what we have seen over a longer period of time. And in the TV business, which is our new business that we have estimated, it is around about 1.5% to 2% at best is the margin at the operating level which we’ve made in the mold making or all the tool making, the margins are anywhere between 25% to 35% depending upon the deliveries in that quarter. These are the broad ballpark margins which we have seen in our different segments.

Shrinidhi Karlekar — HSBC Securities — Analyst

Right. That is helpful. And last one, sir from my end. Sir, you are guiding about INR900 crore of revenue from AC products, right, for the full year ’23? May I ask, how much is it coming from your own design product?

Pramod Chimmanlal Gupta — Chief Financial Officer

It will be almost 80% plus will be from our own ODM products.

Shrinidhi Karlekar — HSBC Securities — Analyst

Right. And it includes inverter air conditioners as well, right?

Pramod Chimmanlal Gupta — Chief Financial Officer

Yes, it includes both inverters speed across all the categories, 1 ton and 1.5 ton.

Shrinidhi Karlekar — HSBC Securities — Analyst

Right. Thank you for answering my questions, and all the very best.

Pramod Chimmanlal Gupta — Chief Financial Officer

Thank you. Thank you very much.

Operator

Thank you. The next question is from the line of Harsh Saraswat, an Individual Investor. Please go ahead.

Harsh Saraswat — Individual Investor — Analyst

Hi, good afternoon for taking my question. My question is in a broader context. Competitors are seeing slowdown in mobile segment and I wanted to understand that, does that helps you gouge a pattern of demand in our segments also? Can we also see a slowdown going forward in the years?

Vishal Gupta — Managing Director-Finance

See I would — actually the behavior of the market is different in both mobile phone products and the consumer durables. If you see industry penetration, the product [Indecipherable] mobile phone and LED TV still has a very good penetration in India, maybe 70% 75% penetration is there of mobile phones and LED TVs. But the product categories like AC, washing machines, the products, what we are trying to aggressively push and try to make it as our growth driver, the penetration levels are very low right now in India.

So what we feel that with the income levels improving and overall flexicity, availability and all those things helping, we see a very good growth potential for next, four, five years. So we have a very strong conviction that this product categories where we are trying to put our focus, they will have a very good growth in times to come.

Harsh Saraswat — Individual Investor — Analyst

Got it. And one more thing, if you were to point out few risks in the business, what would they be like?

Vishal Gupta — Managing Director-Finance

Sir, business is trying to grow — we are trying to grow business very fast. So execution is something which is very important in our business. Let me tell you at the business contract manufacturing, actually there is very little bit, because you get very clear focus from your customers, you don’t really go for big tang out, you make any big blunders, you are able to meet their requirements, you don’t see any major challenges in this.

But aggregation is something very important day-in, day-out because business is so competitive and margins are like [Indecipherable]. So you have to be always on your toes, focusing on cost leadership, trying to loss elimination in your guard that is a continuous focus. So that we will remain relevant all the time, you are able to maintain your cost leadership, that is the focus, and that is actually what we had to keep focusing on day-in, day-out.

Harsh Saraswat — Individual Investor — Analyst

Got it, sir. Thanks. All the best for the future.

Pramod Chimmanlal Gupta — Chief Financial Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Ashish Kumar Singh, an individual investor. Please go ahead.

Ashish Kumar Singh — Individual Investor — Analyst

A very congratulations on your good set. Previous participants asked for the LED TV numbers, I wanted to get those.

Pramod Chimmanlal Gupta — Chief Financial Officer

40,000 for the quarter, and for the first nine months, the total number is about 80 — Just give me a second, I’ll exactly tell you.

Ashish Kumar Singh — Individual Investor — Analyst

Yes. And other than that, I wanted to get your comment on the raw material cost that you have stated that they’ve reduced in the past months, so what do you think — will there be — there will be lower in the coming month or?

Pramod Chimmanlal Gupta — Chief Financial Officer

Yes. So for the first nine months, the number is 80,500 in televisions, and in the last quarter the number was 3,000. Now coming back to the commodity price, it’s very, very difficult to forecast these commodity prices and they are dependent on many factors, which are beyond our control, we are actually a price taker in that market. And some of the commodities, which had softened significantly in the last quarter have actually started moving up, especially the base metals like aluminum, copper, etc. in the recent weeks, in fact, in the last four weeks, there has been a significant movement upward in both copper and aluminum, and it will be reflected — It is a pass-through for us maybe with a lag of a month or so. So it will be reflected in our — I think in the coming months.

Ashish Kumar Singh — Individual Investor — Analyst

Okay. And I wonder to ask, you have mentioned that the inventory has gone up in the last quarter, and I can see that it’s around INR350 crores, so is that inventory on lower cost or against — right now or you say it’s higher right now?

Pramod Chimmanlal Gupta — Chief Financial Officer

See, it is actually the copper and aluminum inventory that you’re carrying, both we were carrying in December, because there has been a significant production also in the month of January and till now in February, was at a lower cost, but we don’t cover ourselves more than about 1.5 to two months in the inventory. Now the prices of the raw materials which we are purchasing are at the market prices, which is at a higher price and what we were having in December.

Ashish Kumar Singh — Individual Investor — Analyst

Okay. And, so I think the margins would improve in the next quarter for the previous inventory, right?

Pramod Chimmanlal Gupta — Chief Financial Officer

No. The issues is there. The pricing also happens with the lag, it is not immediately that we were able to — yesterday the price increased and you will tell your customer that you have to give me a higher price tomorrow, it doesn’t work that way. In our business, the contract manufacturing the price will actually get reset every one month, two month or three months depending upon the contracts. And then according to those contracts, we try to cover ourselves on those inventory. We don’t take a call — active call on the prices of inventories by holding a copper or aluminum. On the fact — on the contrary, whatever orders we have at a price we try to cover ourselves to that extent in those commodity, we don’t actually take a call at all on the prices of commodity.

Ashish Kumar Singh — Individual Investor — Analyst

Okay. And the last question, what is the order book or the interest that you’re seeing for this summer season in AC business?

Pramod Chimmanlal Gupta — Chief Financial Officer

Till March, we have a very strong order book. Whatever our capacities are there, they are all booked out. And we have orders beyond March also. But I will keep my fingers crossed because those orders will start to materialize only if the tertiary and the secondary sales are good beyond March. So till March, I can tell you that we are having — we are running at almost 90%-plus capacity utilization 85% 90% capacity utilization on an expanded capacity in the AC base.

Ashish Kumar Singh — Individual Investor — Analyst

Okay.

Pramod Chimmanlal Gupta — Chief Financial Officer

So as per the numbers, what will happen the production numbers for us, may be 20% higher or 20% lower depending upon the secondary sales which will start happen from the third and fourth week of March, once we have those numbers, then we will be able to give you little better idea. But the numbers will not change much, it may be plus/minus 20%.

Ashish Kumar Singh — Individual Investor — Analyst

Okay. So that’s all. Thank you so much for the opportunity.

Operator

Thank you. That was our last question for today, ladies and gentlemen. I now hand the conference over to the management for closing comments. Over to you, sir.

Vishal Gupta — Managing Director-Finance

I want to thank all for participating in the call. And I want to reiterate once again that please don’t look at the percentage margins in this business, they are actually an outcome, not of the business mix as well as the commodity prices in that particular quarter. Our focus is totally to just put more — push more throughput on the same investment which we have done, and we will be focusing actually much more on getting our asset terms rather then margins. Margin percentage is actually very irrelevant in our business, in our opinion. With this I’ll actually thank you all and I will invite, if any of you want to visit our park both Supa and Noida, please feel free and mail to me or my colleagues and reach out to us, and we will make the arrangements. Thank you very much.

Operator

[Operator Closing Remarks]