Buy Pricol; target of Rs 575 Emkay Global Financial

Emkay Global Financial' research report on Pricol

We met with Vikram Mohan (MD) and the senior management of Pricol, to delve into its business strategy/growth outlook; we also visited its R&D center and manufacturing plant. KTAs: 1) Pricol targets Rs80bn revenue by FY30 (Rs27bn in FY25), with ~12-13% EBITDAM ex-P3L (core business) and ~10% for P3L, while sustaining 20% RoCE. 2) Targets global #1 spot in 2W DIS by FY30 with 45-50% market share (#2, 37% now), while outpacing the 2W industry by 5- 10% aided by recent inroads in leading 2W Japanese OEMs like Honda, Suzuki; has also made requisite investment in manpower, R&D; targets 2x content per vehicle to Rs5k by FY30. 3) After 3Y of development, Pricol targets sharp rampup in disc-breaks (confirmed orders from OEMs) and is also developing CBS, ABS. 4) At P3L, aims to double revenue in 3Y (incl via inorganic), with 10% margin (7% in FY25). 5) Leveraging supplier consolidation, Pricol targets 30% domestic share in all 2W handlebar aggregates by FY30 via technical collaboration/licensing, with in-house development. 6) Industry fears potential ~30-50% OEM production cuts in Jul-Aug (5-10% cuts in Jun) on rare-earth magnet issue. We favor Pricol, on further improvement in its competitive positioning in a fast-premiumizing product category (ie clusters), apart from optionalities around breakthrough in PVs/expansion into other components backed by order wins (eg disc brakes), while sustaining +20% return ratios.

Outlook

Our estimates are unchanged (though rare earth magnet-led potential production cuts are a risk); retain BUY, TP of Rs575 (24x FY27E PER).