Pricol Ltd - Large business additions drive re-rating | Q1FY27 Company update

Pricol delivered a beat to MNCL estimates in 1QFY27, led by new launches (Tata Motors PV, Hero and Force Motors). Margins surprised positively as the RM cost pressure was more than offset by operational efficiencies in the subsidiary business. Pricol is now witnessing new customer addition in the 2W, PV and CV segments, adding to diversification and market share expansion in the cluster business. The announced demerger of cluster business is likely to result in new technical agreements and evolution for Pricol. Further, the new product additions like disc brakes, switches and export orders have re-instated growth in the ACFMS division. Large orders from non-TVS customers in the polymer business has led to massive capex and growth certainty over FY28-29E. All these factors drive our robust growth estimates of 17%/ 16%/ 18% CAGR in Rev/EBITDA/ PAT over FY26-FY28E. This improves earnings visibility from new products/ customers in future, leading to upward revision in valuation multiple to 27x PE (previously 25x) and increase in target price to Rs 810 (previously Rs 724). Maintain BUY rating.

Pricol Ltd. Stock Price Chart

Beat on strong traction on new model launches:

Pricol reported consolidated net sales of Rs 11bn in 1QFY27, +24% yoy, ahead of MNCL estimate of Rs 10.8bn. The strong growth was driven by continued premiumization, new model launches (Tata Tiago, Hero Xoom 125 and Force Urbania) and healthy traction in the acquired business i.e. P3L, outperforming the underlying CV and 2W industry growth.

Margins sustained due to efficiencies at subsidiaries:

Pricol reported consolidated EBITDA margin of 11.3% in 1QFY27, +20bps yoy. Raw material cost inflation along with high freight cost and INR depreciation, has led to gross margin contraction, which was partially offset by operational efficiencies at the subsidiaries. Consolidated EBITDA stood at Rs 1.2bn, +26% yoy. PAT came in at Rs 670mn, rising 34% yoy, despite higher depreciation and finance costs.

Diversification continues in clusters; large capex for P3L:

We believe that Pricol’s leadership position in the Digital Instrument Cluster (DIS) segment will progress to the next stage post the demerger, as it gets a technological partner to drive the advanced cluster development. With a 37% market share in the domestic 2W space, the company aims to scale this to 45-50% by deepening partnerships with key OEMs such as Honda, Suzuki, and Yamaha. Further, addition of new cluster models for Tata Motors and addition of Mahindra, will only add to diversification. The ACFMS segment has witnessed rebound in growth due to introduction of new products (disc brakes and switches) and ramp up of exports. Both these segments are expected to outperform the underlying industry. Additionally, the polymer business has witnessed large order bookings from non-TVS customers leading to a massive Rs 4bn capex to add new capacity. We expect the polymer business to propel more than 20% growth over FY28-29E. All these factors together contribute to strong earnings visibility, leading to upgrade in valuation multiple for the company. Remain positive on Pricol.

Valuation and risks:

We downward revise our earnings estimates by 1.2%/ 1.6% for FY27E/ FY28E, mainly driven by reduction in other income (increase in capex estimates). We forecast a revenue/EBITDA/PAT CAGR of 17%/16%/18% respectively over FY26-28E. We value Pricol at 27x (previously 25x) Jun’28E earnings to arrive at TP of Rs 810 (previously Rs 724) and maintain the BUY rating. Increase in TP is mainly driven by upward revision in valuation multiple and rollover. Risks: Slowdown in ICE/ EV 2W sales, delay in commercializing of new products.

Company website: https://pricol.com/

*CMP is as per report published date

Click to download the full Pricol Ltd. Q1FY27 Company Update

Analyst:

• Sahil Sanghvi - Research Analyst, Institutional Equities (NISM-201900004744)
• Uvais Khatri - Research Associate, Institutional Equities (NISM-202300049054)

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FAQs on Pricol Ltd. Q1FY27 Company Update

What drove Pricol’s Q1FY27 revenue growth?

Consolidated revenue increased 24% YoY to approximately ₹1,100 crore, driven by new model launches, premiumization and continued traction in the acquired P3L business.

How did Pricol’s profitability perform?

EBITDA margin improved 20 bps YoY to 11.3%. EBITDA rose 26% to approximately ₹120 crore, while PAT increased 34% to approximately ₹67 crore.

What is the target price for Pricol?

The institutional research report maintains a Buy rating with a target price of ₹810. This represents an analyst estimate and is not a guarantee of future returns.

What are Pricol’s key growth drivers?

Growth drivers include new customer additions, premiumization, digital instrument cluster opportunities, new ACFMS products, exports and expansion in the polymer business.

How could the polymer business support Pricol?

Large orders from non-TVS customers are supporting a planned ₹400 crore capacity investment. The polymer business is expected to be an important contributor to growth from FY28E onward.

What is the significance of Pricol’s cluster business demerger?

The proposed demerger could support technology partnerships and product development in advanced digital instrument clusters, potentially strengthening Pricol’s competitive position.

What are the key risks for Pricol?

Key risks include a slowdown in ICE or EV two-wheeler demand, delays in commercializing new products and potential execution challenges related to capacity expansion.

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