Pricol Shares Gain 100% in 1 Year, 1,200% in 5 Years: Should You Buy?

Pricol shares have skyrocketed, giving huge returns to investors. Despite market ups and downs, Pricol’s stock has climbed about 100% in the past year and over 1200% in the past five years.

Recently, Monarch Networth Capital gave Pricol a ‘accumulate’ rating and raised its target price to ₹500 from ₹465, seeing a potential 11% increase.

“We upgraded to ‘ACCUMULATE’ and set a new target price of ₹500, due to a higher multiple (24x from 22x) and better margins, although slightly offset by lower revenue estimates and recent strong stock performance,” said Monarch Networth Capital.

Strong Q4 Performance

In Q4 (January-March 2024), Pricol reported a consolidated profit after tax of ₹41.50 crore, up from ₹29.80 crore the previous year. For the fiscal year ending March 31, 2024, net profit was ₹140.61 crore, up from ₹124.68 crore the previous year.

Total income for Q4 increased to ₹588.51 crore from ₹525.37 crore the previous year. For the fiscal year ending March 31, 2024, total income rose to ₹2,284.94 crore from ₹1,963.14 crore the previous year.

Monarch Networth Capital noted that Pricol’s revenue growth didn’t meet expectations due to delays in production from its OEM clients. However, cost savings led to higher than expected EBITDA margins of 13.7%, which the brokerage expects to remain around 13.5%.

Positive Outlook

The brokerage expects new product launches and a return to normal production at OEMs in Q1 FY25, with margins staying between 13 and 13.5%. Pricol has begun producing disc brakes, aiming for ₹300 crore in revenue in three years, and is showcasing new technologies like ecockpit and telematics with SIBROS to various OEMs.

Pricol is also looking at potential acquisitions to reduce risks associated with the automotive cycle and promote growth. With strong growth signs in the two-wheeler industry (+22% production year over year in April), the brokerage expects Pricol to benefit from both higher volumes and premium products.

Valuation and Risks

“We expect revenue/EBITDA/PAT to grow by 19%/22%/28% annually over FY24-27. We value Pricol at a 24x FY26 P/E multiple to set a target price of ₹500, up from ₹465, and give it an ‘ACCUMULATE’ rating. The higher target price is due to better margins and a higher multiple, despite lower revenue estimates. Risks include a slowdown in ICE/EV 2W sales. Despite recent stock gains, we remain positive,” said the brokerage.