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Pricol Ltd

| Q3 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤2nd Feb 26

Summary : Pricol reported strong Q3 results, driven by robust demand and new product pipeline, with significant CAPEX planned for future growth and technology leadership.

Management Perspective positive : "We are very happy that we have crossed a thousand crore milestone during Q3.""We do not see any risk going forward because we have developed alternates.""The demand seems to be quite robust. We had a lot of good tailwinds during Q3.""We expect the same momentum to continue primarily because of our various new product portfolio.""We are sure that we will grow much more than that [industry growth]."

Concall Report Analysis & Insights

Business Overview

  1. Q3 revenue crossed Rs. 1000 crores, a significant milestone.
  2. EBITDA grew 12.19% to Rs. 125 crores in Q3 FY26.
  3. PAT increased by 6.24% in Q3, with EPS at 5.22.
  4. Nine-month consolidated revenue reached Rs. 2900 crores, EBITDA Rs. 350 crores.
  5. Q3 consolidated sales grew 65.67%, EBITDA grew 59.44%.

Future Growth Prospects

  1. Disc brake mass production for a large two-wheeler OEM starts Q1/Q2 FY27.
  2. Battery Management System (BMS) in testing phase, mass production in 3-4 quarters.
  3. New capacities and plant commissioning planned for P3L polymer division.
  4. Developing integrated telematics with driver information systems for future products.
  5. E-cockpit product under proof of concept, mass production in 3-4 quarters.

Management Insights

  1. We are very happy to have crossed the thousand crore milestone in Q3.
  2. The Nexperia component crisis is de-risked with approved alternate suppliers.
  3. Commodity price increases are 100% indexed and recoverable from customers.
  4. CAPEX of Rs. 500 crores over 2-3 years will be met through internal accruals.
  5. We position ourselves as a technology company, investing 4.5% of revenue in engineering.

Signs of Skepticism

  1. Management finds it difficult to provide a steady capacity utilization number due to product diversity.
  2. Specific revenue breakup for new products like disc brake and P3L was not provided.
  3. Quantifying peak capacity or value for disc brake business is currently not possible.
  4. No advanced stage inorganic acquisition in PRICOL Precision segment currently.

Risk Factors

  1. Working capital usage increased due to large sales growth.
  2. Difficulty in quantifying peak capacity for some complex products.
  3. Future growth depends on market conditions, despite outperforming.

Good To Know

  1. Signed an exclusive MOU with BOE (China) for LCD and TFT backward integration.
  2. Partnered with Domino (Europe) for joint study on switches and throttles.
  3. New subsidiary incorporated for flexibility in new partnerships and technologies.
  4. Employee costs increased due to strategic partnerships and development needs.
  5. New labor code has not significantly impacted employee costs, further evaluation ongoing.

Key Drivers

  1. New disc brake production starts soon.
  2. BMS mass production expected in quarters.
  3. Strategic partnerships enhance product portfolio.
  4. Capacity expansion supports future growth.

Key Analyst Discussions

Competitive Environment

  1. PRICOL is the largest supplier of telematics for off-road vehicles in India.
  2. MOU with BOE, world's largest display maker, for LCD/TFT localization.
  3. Partnership with Domino, a pioneer in switches/throttles for premium two-wheelers.
  4. Company is spread across all segments: two-wheeler, PV, CV, off-highway.
  5. Both ACFMS and driver information system divisions are growing equally.

Market Trends & Consumer Behavior

  1. Demand is robust across all market segments, including two-wheeler and commercial vehicles.
  2. Positive sentiments in two-wheeler segment post GST reduction in Q3.
  3. Company has consistently outperformed the market for 8-12 quarters.
  4. Expects continued outperformance due to new product portfolio.
  5. Polymer business revenue growth driven by increased wallet share and new customers.

Financial Highlights

  1. Q3 EBITDA margin for PRICOL Precision was 9.33% on Rs. 233 crores revenue.
  2. CAPEX guidance is Rs. 500 crores over the next two to three years.
  3. Finance costs increased due to working capital usage, no long-term debt.
  4. Employee costs rose due to investments in forward-looking development and strategic partnerships.
  5. Company expects to maintain steady-state margins in future quarters.

Product Composition

  1. Disc brake production for large OEM starts Q1/Q2 FY27.
  2. Battery Management System (BMS) in testing, mass production in 3-4 quarters.
  3. Integrated telematics with instrument clusters under development.
  4. E-cockpit product samples given to passenger vehicle customers.
  5. ACFMS division contributes nearly one-fourth of total consolidated revenue.

Strategic Considerations

  1. New subsidiary incorporated to facilitate new partnerships and technologies.
  2. Company aims to evolve as an auto-electronic technology company.
  3. Investing in a center of excellence for new technologies and value-added products.
  4. Evaluating inorganic acquisition opportunities in PRICOL Precision segment.
  5. Focus on increasing capacity in polymer division due to 90%+ utilization.