EPACK DURABLE Q2 CONCALL: EXPECTS AC BUSINESS TO OUTGROW INDUSTRY; HISENSE WASHING MACHINE PRODUCTION FROM DECEMBER, ₹100 CR ADDITIONAL CAPEX & MARGIN RECOVERY THROUGH OPERATING LEVERAGE

• **FY27 Growth Outlook:** Management expects EPACK Durable's room air conditioner (RAC) business to outperform industry growth, supported by market share gains and new customer additions. • **AC Industry Outlook:** Management estimates the room air conditioner industry could grow 20–25% in FY27, supported by improving demand and lower channel inventories. • **H2 FY27 Outlook:** Management highlighted healthy customer production plans for Q3 and Q4, supported by improved secondary sales and more comfortable channel inventory levels. • **Margin Recovery Outlook:** Management expects EBITDA margins to improve as recently commissioned capacities achieve higher utilization, fixed costs are absorbed and the product mix shifts toward higher-margin appliances. • **EBITDA Margin Guidance:** Management did not provide a specific FY27 or FY28 margin target but identified operating leverage, product mix improvement and reversal of earlier PLI-related customer discounts as key margin drivers. • **Hisense Washing Machine Production:** Pilot production of front-load washing machines is scheduled for completion by November 2026, with commercial mass production expected from December 2026. • **Hisense Partnership:** Company expects its Sri City subsidiary EMTPL to expand from room air conditioners into multiple appliance categories, beginning with front-load washing machines. • **Capacity Utilization:** Management expects improved utilization at Sri City as Hisense scales production and additional customers source appliances from the facility. • **Capital Expenditure:** Management indicated that approximately ₹370 Cr of investment had been completed by September 2026, with a further ₹100 Cr planned to be deployed gradually over the next 6–12 months. • **Future Capex Strategy:** Additional investments will focus on washing machine capacity and new appliance models. Management does not currently envisage another major expansion programme. • **RAC Installed Capacity:** Company has approximately 43 lakh units of installed annual room air conditioner manufacturing capacity. • **RAC Volume Growth:** Management estimated H1 FY27 RAC volume growth at approximately 40–45%, compared with revenue growth of around 58%, reflecting higher selling prices. • **RAC Pricing:** Average selling prices increased approximately 15–20% YoY across models due to higher commodity costs and foreign exchange movements. • **Commodity Cost Pass-Through:** Management indicated that most commodity cost increases have been passed on to customers, although quarterly pricing arrangements create a timing lag. • **Gross Margin Improvement:** Excluding the previous year's PLI income, gross margin improved to approximately 12.8% from 12.4% YoY. • **PLI Income:** Company did not recognize AC PLI income in Q2 FY27, compared with approximately ₹8 Cr recognized in Q2 FY26. • **PLI Scheme Outlook:** Management indicated that FY27 is currently the final year of the applicable AC PLI scheme, although industry discussions regarding a possible extension are ongoing. No extension has been confirmed. • **PLI Discount Reversal:** Management plans to gradually reverse customer discounts previously supported by PLI benefits, which it expects to improve underlying margins. • **Foreign Exchange Impact:** Management highlighted approximately ₹10 Cr of forex losses during H1 FY27, which affected operating profitability. • **Business Diversification:** Non-AC businesses contributed approximately 63% of Q2 revenue, reducing dependence on the seasonal air conditioner business. • **Small & Large Appliances:** Revenue from small and large domestic appliances increased 57% YoY in Q2, led by washing machines and air fryers. • **Appliance Growth in H1:** Small and large domestic appliance revenue increased approximately 62% YoY during H1 FY27. • **Components Business:** Component revenue increased approximately 45% YoY in Q2, supported by heat exchangers, copper tubing, PCBs, fans and moulded components. • **New Product Pipeline:** Company is developing additional appliance categories, including air purifiers and newer washing machine models, alongside recent launches such as vacuum cleaners, tower fans and nutri blenders. • **Customer Diversification:** Company now serves 72 customers across 19 product categories. Revenue concentration from its top two customers has declined to approximately 32% from 72% earlier. • **JV Divestment:** Board approved the transfer of EPACK Durable's 50% stake in Epavo Electricals to Ram Ratna Group for approximately ₹15 Cr. • **Business Restructuring:** Management also announced plans to wind up two non-operating subsidiaries, allowing greater focus on EPACK Durable and EMTPL. • **Debt Position:** Management indicated gross debt of approximately ₹775 Cr and debt-to-equity of around 0.8x. • **Debt Outlook:** Management expects overall debt to remain broadly stable in the medium term, with no significant new capital raising currently planned. • **Working Capital:** Company reduced inventory by approximately ₹125 Cr during Q2 and expects better working capital efficiency as non-AC appliance revenue expands. • **Finance Cost Outlook:** Management expects finance costs to remain relatively controlled despite revenue expansion, supported by inventory optimization and improved customer payment terms. • **Q2 Revenue:** Revenue from operations increased more than 106% YoY to ₹439 Cr from ₹213 Cr. • **Q2 EBITDA:** EBITDA increased to ₹7.1 Cr from ₹0.5 Cr YoY, with EBITDA margin improving to 1.62% from 0.23%. • **Underlying EBITDA Improvement:** Excluding the previous year's ₹8 Cr PLI income, Q2 FY26 EBITDA would have been a loss of approximately ₹7.5 Cr, implying a comparable YoY EBITDA improvement of ₹14.6 Cr. • **H1 FY27 Revenue:** Revenue increased 51.3% YoY to a record ₹1,325 Cr, supported by growth across RAC, domestic appliances and components. • **Q2 RAC Performance:** RAC revenue increased approximately 161% YoY to ₹161 Cr, aided by a low base and better customer demand. • **Key Challenges:** Forex volatility, commodity price fluctuations, delayed cost pass-through, depreciation and interest costs on new facilities, and slower initial utilization of newly created capacity remain key operational challenges.

EPACK DURABLE LIMITED

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