Pricol Ltd — Q2 FY26 earnings call

Pricol Ltd reported robust financial performance for Q2 and H1 FY26. Consolidated revenue from operations for Q2 stood at INR 988 crores, marking a significant 52% year-on-year growth, while EBITDA grew by 41.59% to INR 123.35 crores, achieving a margin of 12.49%. For the first half, revenue reached INR 1,865.59 crores, up 48.89% YoY, with EBITDA at INR 225 crores (34.24% YoY growth) and a margin of 12.07%. This strong performance was attributed to both robust organic growth and the successful integration of Pricol Precision Products Private Limited (P3L).

The company is embarking on a substantial CAPEX cycle, projecting INR 250-300 crores for FY26 and a similar amount for FY27. This investment is aimed at expanding capacities for new business opportunities, including the switches business, SPM space, and disc brake segment, as well as acquiring land for future plant expansions. Management noted that depreciation is expected to continue increasing over the next three years due to these ongoing investments in machinery modernization and debottlenecking, with an annual sustenance CAPEX of INR 120-150 crores.

The acquired plastics business (P3L) demonstrated significant margin improvement, with its EBITDA margin increasing from 6.3% in March to 9.5% by September. Management targets a PAT margin of 10-10.5% for this business within the next one to two quarters. P3L's Q2 revenue was INR 235 crores with an EBITDA of 9.08%. Management anticipates a reasonable growth rate of 11-15% for P3L over the next two years, driven by new customer wins from Ather, Hanon, Autoliv, and Schneider, with active discussions underway with major OEMs like Hero, Honda, Bajaj, and Tata Motors.

Pricol outlined distinct growth trajectories for its key divisions. The ACFMS division is projected for a steep 30-35% year-on-year growth over the next 2-3 years, fueled by new customers and product verticals, with current capacity utilization at 80-85%. DICVS is expected to maintain a steady-state growth above 15%, and its capacity utilization is planned to reduce to approximately 70% after enhancements in the next two quarters to accommodate future growth. The Polymer business is currently operating at 94-95% utilization, necessitating capacity expansion.

Management acknowledged the ongoing semiconductor crisis, particularly due to issues with Nexperia, impacting 80-90 automotive semiconductor parts. While this is expected to affect the industry, Pricol believes the impact on its Q3 sales will not be significant, with potential delays of 2-3 weeks rather than lost revenue, due to proactive management in finding alternate sources. Historically, Q3 is the weakest quarter for the automotive industry, and this trend is expected to continue, potentially leading to a 4-5% shortfall against internal targets.

Pricol is advancing its technology license agreement for handlebar products (switches and throttle), with revenue expected in approximately 24 months as it's a new vertical requiring product conversion and testing. Additionally, the company is undertaking backward integration for optical bonding and screen manufacturing with BOE, aiming for productionization within nine months. This initiative, while not directly revenue-generating, is crucial for self-reliance, reducing import dependence, and achieving cost arbitrage in instrument cluster components (plastics, PCBs, and screens).

The company reiterated its ambitious long-term revenue target of INR 8,000 crores by December 2030 (FY31), acknowledging that current CAPEX plans will not be sufficient and ongoing investments will be required. Regarding dividends, the company announced a full-year dividend for FY25, which was deferred due to market uncertainties. Management indicated a preference for reinvesting capital into the business through CAPEX to create shareholder wealth, citing tax implications associated with dividends.