Pricol Ltd (PRILI)

CMP: | 115 Target: | 140 (22%) Target Period: 12 months BUY

March 3, 2022

Past claims pulled off, bigger plans lie ahead…

Particulars
About the stock: Pricol Ltd (Pricol), established in 1974, is a Coimbatore based

Company Update
Particular ₹ crore
supplier of diversified auto components like instrument clusters, sensors & switches, Market Capitalization 1,401.6
pumps and mechanical products, telematics solutions and wiping systems. Total Debt (FY21) 248.0
Cash & Investments (FY21) 75.6
 FY21 product mix: - ~66% from 2-W, 3-W, ~8% from CV, ~4% from PV,
EV (FY21) 1,574.0
~9% from off-road & tractors & ~12% from aftermarket sales and exports
Equity capital 12.2
 FY21 segment mix: - ~60% from instrument clusters, ~30% from pumps & 52 week H/L (₹) 140 / 60
mechanical products, ~10% from sensors and others Face value ₹1

Shareholding pattern
Mar-21 Jun-21 Sep-21 Dec-21
Q3FY22 Results: Pricol reported muted Q3FY22 results. Promoter 36.5 36.5 36.5 36.5
 Total operating income came in at | 407 crore, flat QoQ FII 10.5 10.6 10.5 11.0

 EBITDA margin came in at 11.6%, down 40 bps QoQ DII 0.2 - - -

 PAT was up 18.5% QoQ at | 17.3 crore tracking lower finance cost & tax rate Other 52.7 52.8 53.0 52.4

Price Chart
20000 400
What should investors do? The stock appreciated at ~8.3% CAGR from ~| 75 in 15000 300

ICICI Securities – Retail Equity Research

March 2017 over the past five years, outperforming the broader Nifty Auto index. 10000 200
 We retain our BUY rating on Pricol amid management discipline over capex 5000 100

spends & debt reduction as well as ambitious long term growth plans. 0 0

Mar-19

Mar-20

Mar-21

Mar-22
Sep-19

Sep-20

Sep-21
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). Nifty (LHS) PRI (RHS)

Recent event & key risks

Key triggers for future price performance:  Tech partnership with Candera,
Sibros Tech, for connected clusters
 De-leveraging of b/s along with debt free subsidiaries. Sweating of assets,
healthy cash flow generation and low capex spend till FY23E  Key Risk: (i) Elongated supply
side issues impacting sales and
 Supplier to leading OEMs with revived presence at Tata Motors
profitability (ii) Loss of volumes
 Sales, PAT to grow at 13.8%, 36.9% CAGR, respectively, over FY21-24E on ICE powered 2-Ws

 LoIs and active discussion from new age OEMs in the electric 2-W space, Research Analyst
expects to gain traction in coming years. Focus on augmenting exports
Shashank Kanodia, CFA
[email protected]

Alternate Stock Idea: In our auto- ancillary coverage we like JK Tyre. Raghvendra Goyal
[email protected]
 Walking the talk on b/s deleveraging, sweating of assets & capital efficiency

 BUY with target price of | 170

Key Financial Summary

2 year CAGR 3 year CAGR
Key Financials FY20 FY21 FY22E FY23E FY24E
(FY19-21) (FY21-24E)
Net Sales 1,239.4 1,413.1 0.5% 1,576.2 1,891.4 2,080.6 13.8%
EBITDA 85.4 177.9 37.9% 183.6 236.4 260.1 13.5%
EBITDA Margins (%) 6.9 12.6 11.7 12.5 12.5
Net Profit (98.8) 41.5 LP 58.4 90.0 106.5 36.9%
EPS (₹) (10.4) 3.4 4.8 7.4 8.7
P/E (11.0) 33.8 24.0 15.6 13.2
RoNW (%) (24.9) 7.9 10.0 13.4 13.7
RoCE (%) (1.2) 9.7 11.9 17.5 18.0
Source: Company, ICICI Direct Research
 Company Update | Pricol Ltd ICICI Direct Research

Buoyancy for future…

Key highlights from recent media publishes
 To strengthen its cluster segment (~60% of sales) it has entered into a
technology tie-up with Candera & Sibros Technologies, Inc. for
development & integration of connected technology into existing clusters &
development of new clusters to meet requirement of new age auto OEMs

 With peak revenue potential of ~| 2,200-2,400 crore annually that is largely

achievable in the next two to three years, Pricol plans to augment its
capacities, capabilities and is targeting revenues of ~| 4,000 crore by FY26.
Capex envisaged for the same is ~| 600 crore, which the management
expects to fund through an equal mix of debt and equity starting FY24E

Exhibit 1: Product offerings of Pricol

Source: Company, ICICI Direct Research

Exhibit 2: New product launches (a glimpse)

Source: Company, ICICI Direct Research

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 Company Update | Pricol Ltd ICICI Direct Research

Financial story in charts

Exhibit 3: Trend in topline & EBITDA margins
2,500 12.8

12.6 12.6
12.5 12.5
2,000 12.4
12.2
1,500 Net sales are expected to grow at 13.8% CAGR over
12.0
₹ crore

FY21-24E to | 2,081 crore, whereas margins to inch

%
2,081
11.8
to 12.5% in FY23-24E.

1,891
1,000
11.7
1,576

11.6
1,413

500 11.4
11.2
- 11.0
FY21 FY22E FY23E FY24E

Revenues EBITDA Margins (RHS)

Source: Company, ICICI Direct Research

Exhibit 4: Trend in PAT & EPS

120 10.0
9.0
8.7
100
8.0
7.4
7.0
80
6.0
₹/share

PAT is expected to grow at 36.9% CAGR over FY21-24E,

₹ crore

60 4.8 5.0
albeit on a low base
107

4.0
90

40 3.4
3.0
58

2.0
20
41

1.0
- -
FY21 FY22E FY23E FY24E
PAT EPS (RHS)
Source: Company, ICICI Direct Research

Exhibit 5: Trend in margins and profitability

25.0

20.0

Return ratios are expected to be in healthy double

15.0 digit starting FY23E
%

22.5

10.0
19.2

18.0
17.5

13.7
13.4
13.0
11.9
10.9

10.0

5.0
9.7
7.9

0.0
FY21 FY22E FY23E FY24E
RoNW RoCE RoIC
Source: Company, ICICI Direct Research

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 Company Update | Pricol Ltd ICICI Direct Research

Financial Summary

Exhibit 6: Profit and loss statement | crore Exhibit 7: Cash flow statement | crore
(Year-end March) FY21 FY22E FY23E FY24E (Year-end March) FY21 FY22E FY23E FY24E
Total operating Income 1,413.1 1,576.2 1,891.4 2,080.6 Profit after Tax 41.5 58.4 90.0 106.5
Growth (%) 14.0 11.5 20.0 10.0 Add: Depreciation & Interest 137.3 108.7 105.9 104.6
Raw Material Expenses 964.8 1,083.6 1,305.1 1,435.6 (Inc)/dec in Current Assets 31.2 -63.5 -97.3 -65.6
Employee Expenses 166.5 200.2 217.5 239.3 Inc/(dec) in CL and Provisions -49.5 29.3 77.9 46.8
Other Expenses 103.9 108.8 132.4 145.6 CF from operating activities 128.6 131.9 175.5 191.3
Total Operating Expenditure 1,235.2 1,392.6 1,655.0 1,820.5 (Inc)/dec in Investments 0.0 0.0 0.0 0.0
EBITDA 177.9 183.6 236.4 260.1 (Inc)/dec in Fixed Assets -30.8 -50.0 -50.0 -120.0
Growth (%) 108.4 3.2 28.8 10.0 Others 9.8 -5.0 0.0 -10.0
Depreciation 94.2 82.7 89.8 98.8 CF from investing activities (21.0) (55.0) (50.0) (130.0)
Interest 43.1 25.9 16.1 5.7 Inc/(dec) in loan funds -183.4 -75.0 -100.0 -50.0
Other Income 7.8 8.5 7.9 8.4 Dividend paid & dividend tax 0.0 0.0 0.0 0.0
PBT 48.5 83.4 138.4 163.9 Interest Expense & Others 113.0 -25.9 -16.1 -5.7
Total Tax 32.7 25.0 48.5 57.4 CF from financing activities (70.5) (100.9) (116.1) (55.7)
Reported PAT 41.5 58.4 90.0 106.5 Net Cash flow 32.3 -24.1 9.5 5.6
Growth (%) -142.0 40.7 54.1 18.4 Opening Cash 42.4 74.8 50.7 60.2
EPS (₹) 3.4 4.8 7.4 8.7 Closing Cash 74.8 50.7 60.2 65.7
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 8: Balance Sheet | crore Exhibit 9: Key ratios

(Year-end March) FY21 FY22E FY23E FY24E (Year-end March) FY21 FY22E FY23E FY24E
Liabilities Per share data (₹)
Equity Capital 12.2 12.2 12.2 12.2 EPS 3.4 4.8 7.4 8.7
Reserve and Surplus 512.6 571.0 661.0 767.5 Cash EPS 11.1 11.6 14.8 16.9
Total Shareholders funds 524.8 583.2 673.2 779.7 BV 43.1 47.8 55.2 64.0
Total Debt 248.0 173.0 73.0 23.0 DPS 0.0 0.0 0.0 0.0
Deferred Tax Liability 57.4 57.4 57.4 57.4 Cash Per Share 6.1 4.2 4.9 5.4
Minority Interest / Others 34.0 34.0 34.0 34.0 Operating Ratios (% )
Total Liabilities 875.9 859.3 849.3 905.8 EBITDA Margin 12.6 11.7 12.5 12.5
Assets PBT / Net sales 5.9 6.4 7.8 7.8
Gross Block 716.0 771.0 826.0 855.8 PAT Margin 2.9 3.7 4.8 5.1
Less: Acc Depreciation 295.4 378.2 468.0 566.8 Inventory days 62.8 60.0 60.0 60.0
Net Block 420.6 392.8 358.0 288.9 Debtor days 48.5 52.0 50.0 50.0
Capital WIP 19.8 14.8 9.8 100.0 Creditor days 72.8 70.0 70.0 70.0
Total Fixed Assets 440.3 407.6 367.7 388.9 Return Ratios (% )
Investments 0.0 362.9 276.4 254.7 RoE 7.9 10.0 13.4 13.7
Inventory 243.2 259.1 310.9 342.0 RoCE 9.7 11.9 17.5 18.0
Debtors 187.9 224.6 259.1 285.0 RoIC 10.9 13.0 19.2 22.5
Loans and Advances 0.0 0.0 0.0 0.0 Valuation Ratios (x )
Cash 74.8 50.7 60.2 65.7 P/E 33.8 24.0 15.6 13.2
Other current assets 0.0 58.6 21.3 26.9 EV / EBITDA 8.8 8.3 6.0 5.2
Total Current Assets 505.8 593.0 651.5 719.7 EV / Net Sales 1.1 1.0 0.7 0.6
Creditors 281.8 302.3 362.7 399.0 Market Cap / Sales 1.0 0.9 0.7 0.7
Provisions 5.6 6.0 7.2 7.9 Price to Book Value 2.7 2.4 2.1 1.8
Other current liabilities 0.0 0.0 0.0 0.0 Solvency Ratios
Total Current Liabilities 287.4 308.3 369.9 406.9 Debt/EBITDA 1.4 0.9 0.3 0.1
Net Current Assets 218.4 284.7 281.5 312.7 Debt / Equity 0.5 0.3 0.1 0.0
Others 112.5 430.3 70.3 44.4 Current Ratio 1.6 1.7 1.6 1.6
Application of Funds 875.9 859.3 849.3 905.8 Quick Ratio 0.7 0.8 0.8 0.8
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

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 Company Update | Pricol Ltd ICICI Direct Research

RATING RATIONALE
ICICI Direct endeavors to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according -to their notional target price vs. current market price and then categorizes them as Buy, Hold,
Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined
as the analysts' valuation for a stock

Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
[email protected]

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 Company Update | Pricol Ltd ICICI Direct Research

ANALYST CERTIFICATION
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reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed
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ICICI Securities | Retail Research 6