Axis Direct initiates coverage on Pricol with Buy rating. Check target price

Pricol shares rose 1.4% to Rs 775.60 on the National Stock Exchange (NSE) on Monday after Axis Direct initiated coverage on the auto-components manufacturer with a ‘Buy’ rating and set a target price of Rs 935.

The target price implies an upside of around 21% from the current market price, while the brokerage had estimated a 22% upside based on its reference price of Rs 765.

“Pricol’s growth would be supported by rising adoption of digital and TFT instrument clusters, expansion of its plastics business, higher content in electric vehicles and new orders from global automobile manufacturers,” Axis Direct said.

Valuation and target price

Axis Direct valued Pricol at 24 times its estimated FY29 earnings per share of Rs 39, arriving at a target price of Rs 935.

The brokerage believes the valuation is supported by the company’s premium product portfolio, growing exports, improving product mix, plastics integration, and expected benefits from operating leverage.

Growth estimates

Axis Direct expects Pricol’s revenue, EBITDA and profit after tax to grow at compound annual rates of 19%, 21% and 24%, respectively, between FY26 and FY29.

Revenue is projected to increase from Rs 3,964 crore in FY26 to Rs 6,679 crore in FY29, while EBITDA is expected to rise from Rs 469 crore to Rs 825 crore. Net profit is estimated to grow from Rs 251 crore to Rs 475 crore during the same period.

The brokerage expects Pricol’s EBITDA margin to improve to around 12.4% by FY29, aided by a better product mix, localisation, plastics integration and scale efficiencies. Return on equity is projected at approximately 22% in FY29.

Proposed business demerger

Axis Direct expects Pricol’s proposed demerger of its Driver Information and Connected Vehicle Solutions business to unlock value for shareholders.

The division, which contributed Rs 2,425 crore or about 61% of Pricol’s consolidated FY26 revenue, will be transferred to Pricol Autotech. It houses instrument clusters, TFT displays, connected-vehicle solutions, e-cockpits, infotainment systems, telematics, battery-management systems and sensors.

Under the proposed arrangement, shareholders will receive one Pricol Autotech share for every Pricol share held. The company’s actuation, control and fluid-management systems and precision-products businesses will remain with Pricol.

The brokerage said the separation could improve earnings visibility, sharpen capital allocation and allow investors to value the two businesses independently. The transaction remains subject to regulatory, NCLT, shareholder and creditor approvals, with completion targeted within 12–18 months.

Plastics vertical expansion

Pricol entered the precision-plastics segment through its Rs 215-crore acquisition of Sundaram Auto Components’ injection-moulding business. The acquired operations include 218 injection-moulding machines and nine blow-moulding machines across six facilities.

The business generated around Rs 924 crore in revenue in FY26 and was operating at approximately 94–95% capacity in the first quarter of FY27. Pricol plans to invest about Rs 400 crore to double its turnover capacity from nearly Rs 1,000 crore to Rs 2,000 crore, with additional capacity expected to become available from FY28.

Market leadership

Axis Direct estimates that Pricol holds a 30–35% share of India’s two-wheeler instrument-cluster market and nearly two-thirds of the commercial-vehicle and off-highway segments. Its share of the two-wheeler TFT cluster market is estimated at 75–80%.

TFT displays currently have a penetration of only around 7–8% among two-wheelers, which the brokerage expects to double over the next two to three years. This shift towards digital displays, connected clusters and higher electronic content per vehicle could help Pricol grow faster than the underlying automobile market.

Meanwhile, Pricol shares have gained 5.73% over the past month on NSE, outperforming the benchmark, which declined 1.94% during the period. The stock recorded a traded value of Rs 6.63 crore, while its free-float market capitalisation stood at Rs 5,729.62 crore.

This article has been written by Somanjali Das, who is not a SEBI-registered Research Analyst or an investment advisor. Somanjali Das does not hold any financial interest in Pricol as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of the EconomicTimes Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment.