Fundamental Analysis of Pricol Limited

Fundamental Analysis of Pricol: The stylish features of vehicle speedometers and accessories are an essential part of every vehicle. The cost of replacing car parts is better than replacing the entire car. In this article, we will look at the fundamental analysis of Pricol Limited, which is engaged in manufacturing automobile components.

Fundamental Analysis of Pricol Corporation

Company Overview

In 1975, the company began manufacturing and handling automotive ancillary components such as driver information, connected vehicle solutions, actuation, control and fluid management systems.

These components and solutions are available to automotive 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 generates revenue from a single segment. As of FY23, domestic sales accounted for 91.84% of total sales, and exports accounted for 8.15%.

industry analysis

The Indian automobile industry is expected to grow to $300 billion by 2026. Current industrial ecosystems are changing or coexisting with combustible engines and electric vehicles. The Indian government is one of the largest producers and exporters of automobile manufacturers, encouraged through policies such as Automotive Mission Plan 2026, scrappage policy, and production-linked incentive scheme.

The Indian government has allowed 100% FDI in the automobile sector. Increased R&D spending is likely to help India explore technological advancements. This is because this sector accounts for 8% of national R&D spending and 40% of global engineering.

Pricol Ltd – Finance

Sales and Net Profit

The company reported Rs. 1,958.56 crore in FY23 compared to Rs. It increased by 26.79% to $154,469.9 billion in FY22. The CAGR over 4 years was 8.76%. Sales stagnated and began to decline during the COVID-19 period, but have since started to increase due to increased sales and tighter cost controls.

Net profit in 2023 was 130 million won. 124.68 crore, up from Rs. In fiscal year 22, it was $51.09 billion. Profit is increasing compared to loss of -173.86 crore in fiscal 2019. This growth is driven by increased sales.

profit

OPM stood at 7.78% in FY23 as against 6.36% in FY22. The five-year average was 4.40%. Margins gradually increased in FY22 and FY23 due to increased sales. The decline from FY19 to FY21 is due to COVID-19 lockdowns and ongoing fixed cost spending.

FY23 NPM rose to 6.01% from 2.93% in FY22, with a five-year average of -5.23%. As can be seen from the operating profit margin, the margin fell due to fixed costs and a difficult business environment, but gradually increased as interest expenses decreased from 2 million won. 43.07 crores in FY21 to Rs. 18.28 billion in FY23, with depreciation down from Rs. 94.91 crores in FY21 to 77.91 crores in FY23.

rate of return

RoE stood at 18% in FY23 compared to 8% in FY22. The average over 5 years was -8.14%. Return volatility has become more volatile due to revenue fluctuations, and the indicator has been increasing since FY21.

RoCE stands at 20% in FY23 compared to 14% in FY22. The average was 5.4%. RoCE yields are higher than RoE yields, indicating that debt finance is being used more effectively, and even debt reduction will help grow returns.

debt analysis

Debt-to-equity ratio decreased from 0.23 in FY22 to 0.13 in FY23. The average for five years was 0.40. Debt is decreasing, which will likely help strengthen the company’s capital structure in the event of an economic downturn.

Interest coverage increased to 11.82x in FY23 from 6.65x in FY22. The average for 5 years was 6.33 times. The reason the ratio increased was because interest expenses decreased and profits increased.

key indicators

Let’s take a look at Pricol Ltd.’s key indicators.

Pricol Ltd’s future plans

• The collaboration between Pricol and BMS Powersafe aims to expand its product portfolio in the EV space supporting end-to-end solutions using the BMS platform.
• The company expects to spend approximately $600 million on CAPEX over the next seven to eight quarters, with $400 million being used for organic growth and the remaining $2 billion for inorganic growth.
• Returns from organic and inorganic investments are expected to reach Rs. 400 billion.
• Pricol has planned investments in production capacity that can help improve capital utilization based on customer commitments.
• Pricol is at the forefront of product premiumization, from machines to LCD systems. This can help increase a company’s product value and increase its revenue and profits, even if vehicle production does not increase.

conclusion

As we near the end of our fundamental analysis of Pricol Ltd., we see that the company is on track to transform into the EV sector to fuel the growth of the automotive ancillary industry. However, the growth of automotive OEM vehicles is intertwined with the growth of Freecall. The company has the potential to increase market share through product innovation and currently has a P/E of 32.35. What do you think about the company’s potential? Let us know in the comments section below.

Written by Santosh

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