Pricol Ltd — Q4 FY25 earnings call

Call held 20 May 2025

Management summary

Pricol Ltd reported a challenging Q4 FY25, with consolidated revenue of ₹752.01 crores and an EBITDA margin of 11.74%, falling short of expectations due to a confluence of factors including forex impact, R&D investments, and market-specific headwinds. Despite this, management expressed confidence in a Q1 FY26 recovery, driven by normalizing two-wheeler demand and strategic investments in the acquired plastics business and new product development. The company aims to achieve its FY26 revenue guidance of ₹3600 crores, supported by organic growth and the acquired entity's contribution.

Highlights

  • Q4 FY25 consolidated revenue from operations stood at ₹752.01 crores, with an EBITDA margin of 11.74%.

  • Full Year FY25 consolidated revenue reached ₹2620.91 crores, achieving a 12.75% EBITDA margin.

  • Q4 FY25 performance was below expectations due to forex impact, increased R&D manpower costs, two-wheeler sector slowdown (OBD 2 transition), and US export tariffs.

  • The acquired plastics business (Pricol Precision Products) contributed ₹140 crores revenue with 5% EBITDA margin in Feb-Mar 2025, with plans to invest ₹250 crores over 8 quarters to improve margins from 7% to 10-10.5%.

  • Pricol's 2-Wheeler segment grew 14% in FY25, outperforming the industry's 9% growth.

  • Standalone Pricol CapEx is in its final leg at ₹200-225 crores for FY26, moving to maintenance mode thereafter.

  • Management reconfirmed FY26 total revenue guidance of ₹3600 crores (organic + inorganic), with potential to reach ₹4000 crores.

Concerns

  • US Export Tariffs & Uncertainty

Key financials

2 periods

Q4 FY25

  • Revenue
    ₹752.01 Cr
    YoY +32.8%
  • EBITDA Margin
    11.7%
  • PAT
    ₹34.95 Cr
  • EPS
    ₹2.87

FY25

  • Revenue
    ₹2,620.91 Cr
    YoY +18.7%
  • EBITDA Margin
    12.8%

What they filed

Q1 FY27: revenue up 24.7%, net profit up 25.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue664 630 624 683 758 +14%800 +27%856 +37%852 +25%
EBITDA74 69 65 78 88 +19%90 +30%95 +46%93 +19%
Net profit42 36 28 39 46 +10%44 +22%78 +179%49 +26%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Pricol Precision Products (Acquired Plastics Business)
    ₹140 Cr Revenue (Feb-Mar 2025)5% EBITDA Margin (Feb-Mar 2025)
  • Two-Wheeler Segment
    65% Revenue Contribution14% Growth (FY25)

Guidance & targets

Profitability

  • Employee Cost as % of Sales Profitability · Normalized basis · High confidence 11.5-12%
    11 and a 1/2 to 12% is on a normalized basis that what we have been delivering and we will continue to deliver that.

    — Vikram Mohan

  • Pricol Precision Products EBITDA Margin Profitability · end of this financial year (FY26) · High confidence High single digits

    Previously 7-7.2% → High single digits

    The high single digit EBITDA we will achieve by the end of this financial year

    — Vikram Mohan

  • Pricol (Standalone) EBITDA Margin Profitability · from Q2 or latest by Q3 outermost · High confidence 12.5-13%
    I had given an EBITDA guidance of about 12.5 to 13% normalized EBITDA which again from Q2 or latest by Q3 outermost we will get back to.

    — Vikram Mohan

Capex

  • Pricol Precision Products CapEx Capex · next eight quarters · High confidence 250 crores
    We are looking at around 250 crores of CapEx over the next eight quarters in that company.

    — Vikram Mohan

  • Pricol (Standalone) CapEx Capex · this year (FY26) · High confidence 200-225 crores
    We are looking at around 200 to 225 crores of CapEx after which we will go into a maintenance CapEx mode.

    — Vikram Mohan

Revenue

  • Pricol Precision Products Revenue Growth Revenue · ongoing · Medium confidence at least 10%
    Revenue will grow for that company also for at least 10%, but we are aiming for a slightly higher revenue growth than that.

    — Vikram Mohan

  • Pricol Precision Products Top Line Revenue · in three years · High confidence 1500 crores

    Previously 750 crores (run rate) → 1500 crores

    We are pretty confident of growing it to about 1500 crores top line in three years that I stand committed to that commitment that we have made.

    — Vikram Mohan

  • Total Revenue (Organic + Inorganic) Revenue · by FY26 · High confidence 3600 crores

    From 3600 crores today

    we've always had a guidance of 3600 crores organically and inorganically by FY26 and if there are some green shoots or some new things we see could go up to as high as 4000 crores and a base guidance of 3600 crores and we stick to that guidance.

    — Vikram Mohan

  • Total Revenue (Organic + Inorganic) Revenue · by FY26 · Medium confidence 4000 crores

    Previously 3600 crores → 4000 crores

    could go up to as high as 4000 crores

    — Vikram Mohan

  • Pricol Precision Products Contribution to Top Line Revenue · ongoing · High confidence 800 crores
    And Sir, the newly acquired entity will be contributing around 800cr to the top line. Yes, thereabouts.

    — Vikram Mohan

Market Share

  • TFT Clusters share of 2W market Market Share · over next two years · High confidence 10%

    Previously 5% → 10%

    This 5% will go to 10% over the next two years.

    — Vikram Mohan

Market context

  • Pricol Precision Products EBITDA Margin Profitability · next year (FY27) · High confidence Double-digit

    Previously High single digits → Double-digit

    and then take it to a double-digit EBITDA in the next year when all investments are completed.

    — Vikram Mohan

Risks & concerns

  • US Export Tariffs & Uncertainty

    high

    New US administration tariffs from January 2025 caused uncertainty, delayed imports, and lost export revenue in Q4. Management expects a trade agreement by Q1 FY26 and export resumption from Q2 FY26.

    Management acknowledged

  • Forex Impact (USD strengthening)

    medium

    The strengthening dollar resulted in a significant forex impact in Q4 FY25, but it is considered deferred earnings due to indexation with customers and will be recovered within six months.

    Management downplayed

  • Two-Wheeler Sector Slowdown (OBD 2 Regulation)

    medium

    The two-wheeler sector, 65% of revenue, saw muted numbers in Q4 FY25 due to the OBD 2 regulation transformation, causing a production slowdown. Revival is noted in Q1 FY26, with normalization expected by Q2 FY26.

    Management acknowledged

  • Supply Chain Disruptions (Electronic Components)

    low

    Quality issues from a Tier 1 vendor caused supply chain disruptions, but 80% of the issue is resolved, leading to Q1 normalization, with complete normalization expected by Q2.

    Management acknowledged

Q&A highlights

3 direct
Employee Expenses and Normalization Direct
11 and a 1/2 to 12% is on a normalized basis that what we have been delivering and we will continue to deliver that. But based on revenue that number could go up by half a percent plus, or minus variance.

Clarifies the impact of R&D investments on a key cost metric and provides a long-term target for employee costs as a percentage of sales.

Asked by Vijay Pandey

Impact of US Tariffs on Exports and Margins Direct
The exports also has not come to a zero Sanjeev. OK, the export slowdown in quarter four, we are seeing the resumption even in quarter one of exports because these are critical to production and we are single source in many cases OK... I just think it's a matter of time before normalcy comes back and I don't think even on the exports, the volumes or the erosion of margins will happen for the foreseeable future, this is our internal analysis because I had requested our head of international business to travel extensively to America and some of our customers in Europe to understand their outlook and things like that, I think it is only a temporary jolt of about two quarters and normality will return after that.

Addresses a significant Q4 headwind, explains management's strategy to mitigate tariff impact on pricing, and provides a timeline for recovery.

Asked by Sandeep

Acquisition Valuation and Future Performance of Pricol Precision Products Direct
It was strategically acquired at a much lower valuation than market value because in order to realize the full potential of this company, Pricol had to invest another 250 crores in modernization, in automation, in improving production efficiencies, so this was taken up by us for discussion and saying that we cannot acquire for a high value and further invest, it is going to have an impact on the return on capital employed, which is why we acquired a 750 crore turnover company for about 195 crores and another 250 crores is going to be invested to grow the company and bring it to a normalized EBITDA because the normalized EBITDA for the plastic component business is about 10% to 10.5%, whereas this company was only at around 7%.

Provides detailed rationale for the acquisition, explains the current lower profitability, and outlines the investment plan and expected margin improvement.

Asked by Saket

3 min read 7 chapters

Detailed narrative

Q4 FY25 Performance Review and Contributing Factors

Pricol Ltd reported a Q4 FY25 consolidated revenue of ₹752.01 crores with an EBITDA margin of 11.74%, falling below management and investor expectations. Key factors cited for this underperformance include a significant forex impact of ₹3.5 crores (deferred earnings), increased R&D manpower costs for new product development, and a muted two-wheeler sector due to the OBD 2 regulation transition. Additionally, new US tariffs led to delayed exports and lost revenue.

Strategic Acquisition: Pricol Precision Products

The acquired plastics business, Pricol Precision Products, contributed ₹140 crores in revenue with a 5% EBITDA margin during February-March 2025. Management explained the acquisition was at a lower valuation (₹195 crores for a ₹750 crore turnover company) due to the need for a ₹250 crore investment over eight quarters for modernization and efficiency improvements. This investment aims to boost EBITDA margins from the current 7-7.2% to high single digits by FY26-end and double digits by FY27, with a target to grow the top line to ₹1500 crores in three years.

Export Challenges and Recovery Outlook

The new US administration's tariffs, effective January 2025, created significant uncertainty for export customers, leading to delayed imports and lost export revenue in Q4 FY25. Exports, which contribute 5% to total revenue and have higher margins, were impacted. Management is confident that India will sign a trade agreement with the US by Q1 FY26, with export resumption expected from Q2 FY26, normalizing earnings.

R&D Investments and Manpower Costs

A calculated decision was made to significantly increase R&D manpower to develop new products and verticals, particularly for the two-wheeler and four-wheeler passenger vehicle segments. These increased manpower costs contributed to higher expenses in Q4. Management anticipates these R&D investments will start yielding revenue results in approximately eight quarters, with steady-state revenue generation expected in about 12 quarters.

Two-Wheeler Market Dynamics and Recovery

The two-wheeler sector, accounting for 65% of Pricol's revenue, experienced muted numbers in Q4 FY25 due to the OBD 2 regulation transformation effective April 1, 2025. This led to a production slowdown, but management reported a significant revival in Q1 FY26. They expect normalization of volumes and supply chain disruptions by Q2 FY26, building on the 14% growth Pricol's 2-Wheeler segment achieved in FY25, outperforming the industry's 9% growth.

Capital Expenditure Plans

Pricol (standalone) is in the 'last leg' of its high CapEx journey, with an estimated ₹200-225 crores planned for FY26, after which it will transition to a maintenance CapEx mode. For the acquired Pricol Precision Products, an additional ₹250 crores will be invested over the next eight quarters to enhance efficiency, add capacity, and modernize operations, supporting the target of growing its top line to ₹1500 crores in three years.

Instrument Cluster Technology Shift

The company is observing a continuous shift in the instrument cluster market from mechanical to electromechanical, hybrid, and TFT (Thin-Film Transistor) displays. While mechanical and electromechanical currently comprise 40-50% of the market, pure mechanical clusters are expected to fade out completely within two years. TFT clusters, currently at 5% of the two-wheeler market, are projected to grow to 10% over the next two years, with 85% of the market evenly split between electromechanical and hybrid clusters.

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