Stock of the Week : Rico Auto Industries Ltd for Target Rs. 104 - GEPL Capital
Rico Auto Industries Ltd
Buy Rico Auto Industries Ltd CMP 89.7 Target 104 Stop loss 78
Investment Rationale
* RICOAUTO Delivers Stable Revenue and Margins in Q1 FY2026: Rico Auto Industries posted revenues of Rs.543 crore in Q1 FY26, largely stable on both YoY and QoQ basis, despite subdued volumes at key OEMs such as Maruti and Hero. The stability was underpinned by higher business share secured last year. Profitability saw a sharp improvement, with net profit nearly tripling to Rs.17 crore from Rs.6 crore in Q1 FY25, aided by stringent cost-control initiatives. Notably, in the two-wheeler segment, while the overall market contracted by 6.2%, Rico Auto delivered a healthy 4.4% growth.
* Order book and New Programs with OEMs backs Future Revenue Visibility: The company’s order book stands at over Rs.1,000 crore annually at peak execution levels, with incremental business wins being added each quarter. For FY26, management has guided to revenues of around Rs.2,600 crore, including Rs.156 crore from confirmed new programs with OEM partners. These new businesses are expected to meaningfully scale up, contributing Rs.550 crore in FY27 and further rising to nearly Rs.800 crore in FY28, providing strong multi-year revenue visibility.
* Margin Expansion and Steady growth in its subsidiary: The company remains confident of sustaining profitability gains, targeting EBITDA margins of 12–13% by Q4 FY26 and on a full-year basis in FY27. This should be driven by higher utilization of existing capacities, particularly in ferrous components, with utilization levels projected to approach 90% at the foundry by end-FY27—providing a meaningful uplift to earnings. Currently, the business mix is skewed towards aluminium (85%) and iron (15%), but management expects the iron segment to expand to 24–25% over the next year, further strengthening the profitability profile.
* Valuations: We model a Revenue/PAT CAGR of 6%/23% and estimate RICOAUTO to clock PAT of Rs 40 Cr by FY28E. RICOAUTO is trading at forward PE(x) of 31.5x and we value at 36.5(x) FY28E and Recommend BUY on RICOAUTO with target Price of Rs. 104 (16%).
Observation
* RICOAUTO hit a lifetime high of Rs.157 in April 2024, followed by a correction to the Rs.60 level, where it formed a Change in Polarity (CIP) pattern. Since then, the stock has resumed its bullish structure, forming Higher Highs and Higher Lows on the monthly timeframe.
* On the weekly chart, the stock has broken out of a descending trend line in the current week, engulfing nine weeks of price action in a single bullish candle, along with a breakout above the recent swing high—strengthening the positive outlook.
* Notably, the stock has sustained above its 200 -week EMA (Rs.81.04) for the first time since February 2025, signaling a strengthening bullish undertone.
* The momentum indicator RSI remains above 60 and exhibits a bullish crossover, further validating the ongoing upward momentum.
SEBI Registration number is INH000000081.
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