Buy Pricol; target of Rs 600: Emkay Global Financial

Emkay Global Financial's research report on Pricol

Pricol reported a soft Q3 revenue performance (~5% miss), partially impacted by supply issues, which are seen normalizing from Q1FY26. Pricol expects the existing business to grow at 13-15% over coming couple of quarters driven by premiumization and new products; it also plans to double revenues of recently-acquired SAC (refer to our note) to Rs16-17bn over 3 years via cross-selling, higher value-additive content, and inorganic means, accompanied by ~200bps margin uptick vs current high single-digit levels amid focus on operating efficiencies, with consolidated margins seen at ~11-12%. We believe Pricol remains a prime play on premiumization (over 40% market share in 2W instrument clusters, with 75-80% market share in TFT, ie touchscreen clusters). While exports remain weak, new product development efforts are continuing, with potential entry into 4W infotainment screens (infotainment screens and E-cockpits both under testing with key clients; revenue contribution expected from FY27) in addition to ramp up in disc brakes over coming 8-12 months. We cut FY25E EPS by 3.3% on Q3 revenue miss, and give effect to SAC consolidation from FY26E, leading to 2.7% increase in FY27E EPS.

Outlook

We retain BUY and revise TP down by 7.7% to Rs600 at 25x Dec-26E PER (target multiple revised down from 27.5x earlier due to RoCE-dilutive business consolidation).