Fundamental Analysis of Pricol: Stylish features on a vehicle speedometer and accessories are an essential part of any vehicle. The cost of replacing any vehicle part is better than replacing the whole vehicle. In this article, we will look into Fundamental Analysis of Pricol Limited, which is into manufacturing of Automobile parts.
Table of Contents
Fundamental Analysis of Pricol Ltd
Company Overview
In 1975, the company started manufacturing and dealing in automobile ancillary components such as driver information, connected vehicle solutions, and Actuation, control, and fluid management systems.
These components and solutions are offered to automobile OEMs in over 2000 product variants, including two-wheelers, passenger vehicles, four-wheelers, commercial vehicles, and off-road vehicles. Manufacturing plants are located in Coimbatore, Manesar, Patnagar, Pune, Satara, and Sricity in India, with one plant in Jakarta, Indonesia.
Segment Analysis
Pricol has a presence in countries such as the United Arab Emirates, India, Indonesia, Singapore, and Japan and derives its revenue from a single segment. In FY23, domestic sales accounted for 91.84% of total sales, while exports accounted for 8.15%.
Industry Analysis
The Indian automobile industry is expected to be worth $300 billion by 2026. The current industry ecosystem is transforming or coexisting with combustible engines and electric vehicles. The Indian government is one of the largest automaker producers and exporters, which is encouraged by policies such as the Automotive Mission Plan 2026, scrappage policy, and production-linked incentive schemes.
The Indian government has allowed 100% FDI in the automobile sector. The increase in R&D spending will most likely help India explore technological advancements, as the sector accounts for 8% of the country’s R&D spending and 40% of global engineering.
Pricol Ltd – Financials
Revenue and Net Profit
The company reported Rs. 1,958.56 crore in FY23, compared to Rs. 1,544.699 crore in FY22, representing a 26.79% increase. The CAGR over 4 years stood at 8.76%. Revenues stagnated and began to decline during the COVID period, but have since begun to rise due to an increase in sales volume and better control of costs.
In FY23, net profit was Rs. 124.68 crore, up from Rs. 51.09 crore in FY22. Profits are increasing in comparison to the loss of -173.86 crore in FY 2019. This growth is due to a rise in sales.
| Financial Year | Revenue (Cr.) | Net Profit (Cr.) |
|---|---|---|
| 2022-23 | ₹ 1,958.56 | ₹ 124.68 |
| 2021-22 | ₹ 1,544.69 | ₹ 51.09 |
| 2020-21 | ₹ 1,413.11 | ₹ 41.49 |
| 2019-20 | ₹ 1,239.42 | ₹ -98.75 |
| 2018-19 | ₹ 1,399.79 | ₹ -173.86 |
| CAGR (4 Years) | 8.76% | - |
Profit Margins
OPM stood at 7.78% in FY23 as opposed to 6.36% in FY22. The five-year average was 4.40%. Due to sales growth, margins gradually increased in FY22 and FY23. The drop in FY19 to FY21 was due to COVID lockdowns and constant fixed-cost expenses.
In FY23, the NPM was 6.01%, up from 2.93% in FY22, and the 5-year average was -5.23%. Margins were down due to fixed cost factors and a difficult business environment, as seen in OPM, but gradually increased due to a decrease in interest costs from Rs. 43.07 crores in FY21 to Rs. 18.28 crores in FY23 and a decrease in depreciation costs from Rs. 94.91 crores in FY21 to 77.91 crores in FY23.
| Financial Year | OPM (%) | NPM (%) |
|---|---|---|
| 2022-23 | 7.78% | 6.01% |
| 2021-22 | 6.36% | 2.93% |
| 2020-21 | 5.53% | 1.09% |
| 2019-20 | 0.11% | -18.64% |
| 2018-19 | 2.23% | -17.56% |
| Average (5 Years) | 4.40% | -5.23% |
Return Ratios
The RoE stood at 18% in FY23 as compared to 8% in FY22. Over five years, the average was -8.14%. The returns were more volatile due to fluctuating profits, and the metric has been increasing since FY21.
RoCE stands at 20% in FY23 as compared to 14% in FY22. The average stood at 5.4%. The RoCE returns are higher than the RoE returns, indicating that debt finance is being used more effectively, and even a debt reduction will aid in the growth of returns.
| Financial Year | RoE (%) | RoCE (%) |
|---|---|---|
| 2022-23 | 18% | 20% |
| 2021-22 | 8% | 14% |
| 2020-21 | 3.07% | 16% |
| 2019-20 | -39.81% | -9% |
| 2018-19 | -30% | -14% |
| Average (5 Years) | -8.14% | 5.40% |
Debt Analysis
The debt-to-equity ratio was 0.13 in FY23, down from 0.23 in FY22. The average stood at 0.40 over 5 years. The debt is decreasing, which will likely assist the company in strengthening its capital structure in the event of a downturn in the economy.
Interest coverage was 11.82 times in FY23, up from 6.65 times in FY22. The average stood at 6.33 times over 5 years. The increase in the ratio is due to a decrease in interest costs and an increase in profits.
| Financial Year | D/E | Interest Coverage |
|---|---|---|
| 2022-23 | 0.13 | 11.82 |
| 2021-22 | 0.23 | 6.65 |
| 2020-21 | 0.44 | 4.39 |
| 2019-20 | 0.8 | 3.15 |
| 2018-19 | 0.41 | 5.65 |
| Average (5 Years) | 0.4 | 6.33 |
Key Metrics
We will look into some of the key metrics of Pricol Ltd.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| CMP | ₹ 348.65 | Market Cap (Cr.) | ₹ 4,221.98 |
| RoE | 18% | RoCE | 20% |
| Price to Book Value | 5.98 | Debt to Equity | 0.13 |
| Promoters Holding | 38.51% | Public Holding | 51.94% |
| P/E | 32.35 | EPS | ₹ 11.16 |
| Enterprise Value (Cr.) | ₹ 4,411.89 | Net Profit Margin (%) | 6.01% |
Future Plans Of Pricol Ltd
- Pricol’s collaboration with BMS Powersafe aims to broaden its product portfolio in the EV space, which aids in end-to-end solutions using the BMS Platform.
- The company expects to spend approximately 600 crore on CAPEX over the next 7 to 8 quarters, with 400 crore going toward organic growth and the remaining 200 crore going toward inorganic growth.
- Revenue from organic and inorganic investments is expected to reach Rs. 4000 crore.
- Pricol, based on customer commitments, has planned its investments in production capacity, which can help improve fund utilization.
- Pricol is making advances in product premiumization, from mechanical to LCD systems, which can help the company increase its product value and boost revenue and profit even if vehicle production does not increase.
Conclusion
As we near the end of our fundamental analysis of Pricol Ltd., the company is on track to transform itself into the EV segment to foster growth in the automobile ancillary industry. However, the growth of automobile OEM vehicles is linked to the growth of Pricol. The company holds the potential to increase its market share through product innovation and currently has a P/E of 32.35. What do you think about the potential of the company? Let us know in the comments section below.
Written by Santhosh
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