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Past claims pulled off, bigger plans lie ahead…

About the stock: Pricol Ltd (Pricol), established in 1974, is a Coimbatore based supplier of diversified auto components like instrument clusters, sensors & switches, pumps and mechanical products, telematics solutions and wiping systems.

FY21 product mix: - ~66% from 2-W, 3-W, ~8% from CV, ~4% from PV, ~9% from off-road & tractors & ~12% from aftermarket sales and exports

FY21 segment mix: - ~60% from instrument clusters, ~30% from pumps & mechanical products, ~10% from sensors and others

Q3FY22 Results: Pricol reported muted Q3FY22 results

Total operating income came in at | 407 crore, flat QoQ

EBITDA margin came in at 11.6%, down 40 bps QoQ

PAT was up 18.5% QoQ at | 17.3 crore tracking lower finance cost & tax rate

What should investors do? The stock appreciated at ~8.3% CAGR from ~| 75 in March 2017 over the past five years, outperforming the broader Nifty Auto index.

We retain our BUY rating on Pricol amid management discipline over capex spends & debt reduction as well as ambitious long term growth plans.

Target Price and Valuation: Introducing FY24E, we now value Pricol at | 140 i.e. 16x P/E on FY24E EPS of ~| 8.7/share (earlier target price | 95).

Key triggers for future price performance:

De-leveraging of b/s along with debt free subsidiaries. Sweating of assets, healthy cash flow generation and low capex spend till FY23E

Supplier to leading OEMs with revived presence at Tata Motors

Sales, PAT to grow at 13.8%, 36.9% CAGR, respectively, over FY21-24E

LoIs and active discussion from new age OEMs in the electric 2-W space, expects to gain traction in coming years. Focus on augmenting exports

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