Pricol Ltd. share price target

We met with Vikram Mohan (MD) and the senior management of Pricol, to delve into its business strategy/growth outlook; we also visited its R&D center and manufacturing plant.

Pricol reported a weak Q4 with core revenue growth/EBITDA margin (ex-P3L) below our estimate of 9.7%/12.2% amid muted 2W segment revenue (on OBD 2B regulation change), supply chain disruptions, and delayed exports.

Pricol reported a soft Q3 revenue performance (~5% miss), partially impacted by supply issues, which are seen normalizing from Q1FY26.

Pricol has entered into an agreement for acquiring the plastic injection molding business of Sundaram Auto Components (SAC; FY24 sales/PAT of Rs7.3bn/190mn) on all-cash, debt-free basis at an attractive valuation of ~8x FY24 PER.

Pricol offers strong multi-year earnings growth visibility (29% FY24-27E EPS CAGR) with attractive valuation relative to other 2W ancillaries.

Q4 revenue performance was better than underlying 2W industry production
growth, but impacted by delay in start of production of new launches by a few
customers. Margins saw strong expansion of 85bps QoQ to 12.7%.

Q4 revenue performance was better than underlying 2W industry production
growth, but impacted by delay in start of production of new launches by a few
customers. Margins saw strong expansion of 85bps QoQ to 12.7%.

DALBHARA: All set for healthy growth; upgrade to BUY. PRICOL: Management meet note: Balancing margins and growth. Metals & Mining: CRU meet takeaways: Outlook for steel and aluminium

PRICOL is a global-level manufacturer of instrument clusters and fuel-level sensors for 2/3W with ~70% of its revenue from cluster segment

Indian markets are on the MOVE towards Electric Vehicles manufacturing, Pricol has already switched its gear to be EV ready across its product verticals and started its supplies to OEMs....

Instrument clusters, pumps & mechanical products and switches & sensors formed ~50%, ~25%, ~11% of standalone FY20 sales, respectively. The company is a leading supplier of instrument clusters for large 2-W players domestically and enjoys significant wallet share with them. Move towards increasing digitisation of instrument clusters post introduction of BS-VI emission norms is slated to be a large growth opportunity in coming times. BS-VI switchover has also benefited the fuel pumps vertical. Sales from these margin accretive new products formed 40% of 9MFY21 revenues, with...

We initiate coverage on Pricol as a BUY with a price objective of Rs 120, representing a potential upside of 40% in the next 12 months. We arrived at the price target by applying 15 times PE multiple to earnings for the 12-month period to June19. Pricol should be part of an investors long term portfolio for the following reasons: