Pricol share price has surged over the years, giving out huge multibagger returns to its investors. As volatility continues to be a persistent component affecting market movements, it is difficult for any stock in the market to sustain an ongoing upward trend and continuously reach new record highs over a lengthy period of time. However, Pricol share price has soared by about 100% in only a year and by over 1200% in the last five years.
Recently, brokerage house Monarch Networth Capital moved to an ‘accumulate’ rating for the stock and revised its target price to ₹500 from ₹465 previously. The brokerage sees a potential upside of 11% for the stock.
“We move to ACCUMULATE rating and revise our target price to ₹500, mainly due to an increase in multiple to 24x (previously 22x) and upward revision in margins, partially offset by reduction in revenue estimates, and the outstanding recent stock performance,” the brokerage said.
Also Read: Multibagger stock: Pricol climbed over 900% in less than four years; what lies ahead?
Overall decent performance in Q4
According to an exchange filing, Pricol recorded a consolidated profit after tax of ₹41.50 crore for the quarter ending in January–March 2024.
During the same time last year, the Coimbatore-based auto component producer reported a net profit of ₹29.80 crore. The net profit for the fiscal year that concluded on March 31, 2024, was ₹140.61 crore, compared to ₹124.68 crore the previous year.
Consolidated total income for the quarter under review increased to ₹588.51 crore from ₹525.37 crore during the same period the previous year. The consolidated total income climbed to ₹2,284.94 crore for the fiscal year that ends on March 31, 2024, from ₹1,963.14 crore the previous fiscal year.
Pricol’s revenue growth expectations were not met, according to Monarch Networth Capital’s brokerage, mainly as a result of its OEM clients’ delayed start of production. Due to manufacturing savings, adj. EBITDA margins were unexpectedly high at 13.7%; the brokerage anticipates these levels will remain between 13.5% and 13.5%.
Outlook positive
According to the brokerage’s analysis, it expects new launches and a return to normalcy of production delays at OEMs beginning in 1QFY25, with margins expected to remain between 13 and 13.5%. With seven clients served, Pricol has started producing disc brakes for sale with the goal of reaching a revenue milestone of ₹300 crore in the next three years. Several OEMs are being shown new technologies like ecockpit and telematics (in partnership with SIBROS).
Pricol is continually evaluating possible assets for purchase (during the due diligence phase) in an effort to reduce the risks associated with the automotive cycle and promote business expansion. In light of the 2w industry’s strong growth indications (output increased by +22% year over year in April of this year), the brokerage expect Pricol to take advantage of both volume and premiumisation possibilities.
Valuation and risks
“We forecast a revenue/EBITDA/PAT CAGR of 19%/22%/28% over FY24-27E. We value Pricol at 24x (previously 22x) FY26 P/E multiple to arrive at target price of ₹500 (previously ₹465) and move to ACCUMULATE rating. The increase in target price is mainly due to an increase in multiple and margins, partially offset by a reduction in revenue estimates. Risks: Slowdown in ICE/ EV 2W sales. We remain positive, though the recent stock price performance has reduced some of the upside,” the brokerage said.
Also Read: Multibaggers: 3 shipbuilding stocks including Cochin Shipyard gained between 200% and 725% in a year
Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.
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Published: 25 May 2024, 10:08 AM IST
