Buy Pricol; target of Rs 575: Emkay Global Financial

Emkay Global Financial' research report on Pricol

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. Q4 margin was hit by forex headwinds (~Rs35mn) and higher employee costs (due to growth-focused investments in employee hiring/R&D costs), which the management expects to stabilize to ~12% (vs 13.3% in Q4) as new products scale-up over coming 8-12 quarters. The mgmt maintained its FY26 consol revenue guidance of Rs36bn (13-15% growth) led by premiumization tailwinds in DIS; P3L’s integration is also under way, with margin seen improving to a high single digit/double digits by FY26/27 (vs 7% in FY25).

Outlook

We trim FY27E consol EPS by ~2% on gradual ramp-up in P3L’s operations and higher depreciation due to growth capex; we cut FY27E core-business EPS by 4.3% amid higher depreciation; retain BUY with TP of Rs575 at 24x FY27E PER, and continue to believe Pricol is the best play on screenification (refer to our IC).