Pricol Business and Future Outlook🧵

Pricol Limited is engaged in the business of manufacturing and selling of instrument clusters and other allied automobile components to OEMs and replacement markets.
The business was started in 1974 and is headquartered in Coimbatore, Tamil Nadu.
The company provide solutions in two verticals:-

1. Driver Information System (DIS). 
   

2. Actuation Control & Fluid Management Systems (ACFMS).
   

• DIS –
  DIS monitor’s the vehicle systems and provides us with the parameters such as speed, engine RPM,
  fuel level, phone connect and various warning indicators at vehicle level.
  The DIS are currently being offered via LCD, TFT and Hybrid mechanism.

• LCD –
  LCD Clusters offers a digital monitoring of critical vehicle information in different type of LCDs like Segmented LCD / Dot Matrix Display, Positive Type, Negative Type, Color LCD with different background color White / Blue / Red / Amber.
  Credit – [https://pricol.com]
  

• TFT –
  TFT Clusters offers a digital monitoring of vehicle information with different sizes of TFT like 2.8”, 5”, 7”,10.25 &12.2”. Different Themes & Modes are Possible according to the Rider’s Selection and Vehicle Ride mode, respectively.
  Credit – Pricol
  

• Hybrid –
  Hybrid Display Clusters offers digital monitoring of critical Vehicle Information in LCD and Information about Safety, Security & Convenience in TFT display.
  

Pricol ranks as 2nd largest manufacturer globally for instrument clusters.
It holds a substantial market shares-

1. 50% in a 2-wheeler.
2. 70% in Commercial Vehicles.
3. 50% in Tractors.
4. 90% in Off-road vehicle segments.
5. 07% in Passenger vehicles respectively.

Credit: MNCL Research

With the implementation of BS-VI standards, There has been a gradual change noticed in the instrument cluster industry with the transition from the manufacturing of mechanical clusters to digital which have 3x/10-15x higher content per vehicle compared to mechanical clusters.

The revenue contribution by vehicle segment in DIS for FY23 is as follow –

1. 2/3W ~ 65%
2. Commercial Vehicle ~ 15%
3. Passenger Vehicle ~ 7%
4. Tractor and Off Road Vehicle ~ 13%

Since, it’s a proxy to vehicle manufacturing companies, Its sales are directly proportional to the production of vehicle units.

With the headwinds during the pandemic era, the challenges posed by BS-VI standards, shortage of semiconductor and higher interest rates, the sales growth was sluggish during FY19-22.
Now since the automobile industry is started to cooling off and various factors are in placed to be aligned and with the likely reversal of interest rate cycle leading to substantial moderation in rates, surge in replacement demand and increase in rural demand, The 2W industry is expected to grow at a CAGR of 11% from FY23-26E and with a market share of 50% in 2W instrument clusters, Pricol is positioned to be a major beneficiary of the robust growth in 2W production.

2W DIS revenue is expected to grow at a CAGR of 35% over FY23-26E.

Company Key Customers in the 2W segment:-

The company is the market leader with 70% of the domestic market share in the commercial vehicle instrument cluster.
The company has increased its market share from 45% to 70% over the FY19-23.

Company key customers in CV Segment:-

At present, Pricol commands a 7% market share in the PV segment, primarily due to its partnership with Tata Motors and is poised for continued growth in collaboration with them in their ICE and EV offerings.

Company key customers in PV Segment.

Credit:- https://pricol.com

With the increasing premiumization of transitioning from mechanical to digital cluster with an increase in TFT shares to 20% by FY26E and higher CPV, 2W production reaching pre-covid level and expected to grew at CAGR of 11% over FY23-26E, More EV penetration and growing presence in PV segment.

DIS segment is poised for a robust 27% CAGR over FY23-26E period.

Actuation Control & Fluid Management Systems (ACFMS) segment:-

The ACFMS segment contributed 35% to total consolidated revenue in FY23. Currently, water pumps, oil pumps, and fuel pumps collectively contribute ~60-70% to revenue of the ACFMS segment.

Pricol Market Shares –

1. Oil Pumps in 2W segment ~ 38%
2. Fuel Sensor in 2W segment ~ 26%

Pricol introduced new products under ACFMS i.e electrical coolant pumps, electrical oil pumps and BMS foray into EV-specific product as 2W ICE engines are at the risk to being obsolete due to increasing EV penetration over the next 5-7 years.
The ACFMS segment constitutes a significant portion of exports, accounting for ~90% of the total exports in FY23. Exports constituted 8% of the total consolidated revenues in FY23 and the company aims to scale up this to 20%.

The ACFMS segment grew at a CAGR of 5% over FY18-23.
With the selected customer win in FY23 for the product electric coolant pumps, fuel pump module assembly for Tata Motors and Bajaj.
The ACFMS segment is expected to grow at a CAGR of 12% over the FY23-26E with expansion in the export geographies, increase in domestic market share for the electric coolant and oil pump.

Risk associated to the thesis :-

1. Slow adoption of EV.
2. Delay in spending the committed capex and ramping up the capacities commissioned.
3. Disruption in supply chain and semiconductor issue.
4. Delay in new product launches and discontinuation of models by the OEMs.