Pricol Q1 FY27 earnings call

Pricol Ltd reported a consolidated revenue from operations of ₹1083.58 crores for Q1 FY27, marking a 23.46% year-on-year growth. EBITDA stood at ₹123.69 crores with a margin of 11.41%, reflecting a 21.42% growth compared to the same quarter last year. Profit After Tax (PAT) reached ₹67.02 crores, translating to a PAT margin of 6.19% and a significant 34.34% year-on-year growth. The company achieved an EPS of ₹5.50 per share.

Despite strong top-line growth, EBITDA margins faced headwinds from various factors including the West Asia crisis, surging polymer and LPG prices, increased freight costs, and sharp minimum wage increases in three states. Management indicated that these are 'delayed earnings' rather than 'lost earnings,' expecting recovery through indexation in Q2 and Q3 FY27. The automotive industry's typical quarterly or half-yearly indexation for Forex and commodity costs is being leveraged, with efforts to make everything quarterly indexing.

The proposed demerger is driven by the rapid technological changes in the driver information system and connected vehicles business, requiring substantial investment and strategic partnerships. Separating the core business aims to provide greater agility for raising capital and attracting technology partners, as each business vertical has a different investment appetite. This move is intended to maintain Pricol's leadership and competitiveness against multinational players.

Pricol has initiated a ₹700-crore CAPEX cycle over the next 18-24 months. Approximately ₹400 crores are allocated to the Polymer vertical for new capacity and relocating from TVS campuses. The DICVS vertical will receive ₹150-180 crores, and the ACFMS vertical ₹120 crores. New plants are being set up in Hosur, Mysore, Aurangabad, Sanand (for Honda), and Bhiwadi (NCR) to support this expansion. The ROCE for the Polymer business is expected to temporarily drop due to this heavy investment but will stabilize at 16-18% post-completion.

Both DICVS and ACFMS businesses grew around 25% year-on-year. The two-wheeler segment within DIS outperformed the industry, growing 28% against an industry average of 23%. The Polymer business, despite capacity constraints, recorded ₹249 crores in revenue with a 7.8% EBITDA margin. New product introductions, particularly in switches and disc brakes, are expected to drive future growth, with disc brake and switches revenues kicking in from FY28. The company is actively acquiring new customers across segments, including Honda, Ather, River, Simple Energy, Raptee, Royal Enfield, and Suzuki.

Pricol is focusing on moving up the value chain in its Polymer division, establishing a center of excellence for Polymer technology by May 2027. This includes investments in 2K Molding, self-healing plastics, and fiber-reinforced plastics to replace metal parts. In the e-cockpit space, while Pricol has developed the technology, it acknowledges a cost disadvantage against multinational competitors due to lower volumes, thus focusing on 2-wheeler, commercial, and off-road vehicle segments.

The company has paused M&A activities for the next year to concentrate on organic growth, ramping up new factories, and streamlining existing businesses. Management reiterated its FY30 revenue target of ₹8000 crores, emphasizing that the M&A pause is temporary and will not impact long-term goals. The focus remains on profitable business acquisition and maintaining a strong growth trajectory across all divisions.