Pricol closed the quarter and the year on a strong note. Revenues, operating profits and PAT for the quarter were highest ever and operating & net margins improved. Quarterly revenues grew around 12 % Y-o-Y and PBT grew 33 %. Quarter on quarter, revenues grew 2 % and PBT grew 24 %. Revenue growth was slower as some customers deferred their product launches, which have since happened after quarter end, so the deficit will be made up in the coming quarters, says the management. For the year, CFO was strong at more than Rs.250 crores which is 1.8 times the PAT, and all long-term debt has been paid off, said the management (My comment: Company saw a CRISIL rating upgrade in Q3). Revenue growth for the year was a respectable 16 % and operating profit growth 20 %. Asset turnover improved to nearly 3 X.
Management says ROCE is steadily increasing and has hit 23.18 % in FY24 against 20.68 % in FY23 while EBITDA will reach around 13.5 % in future. A few points to note from the concall:
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Product wise revenue break up is about 69 % DIS and 31 % ACFMS, the latter expected to go up to 35 % in the coming year
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Customer segment wise revenue break up is Two wheelers about 50-53 %, PVs is about 6.8 %, Commercial Vehicles about 25 % and balance coming from Off Road vehicles.
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Disc Brake is a very strategic product of ACFMS division. With six customers, production has started and is ramping up. Capacity for about 10 crore per month has been set up and will be enhanced over the next two years to between 300 – 400 crores per annum based on the business expansion.
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E-cockpit adoption will take some time in the market
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Sibros connected vehicle solutions – some updates may be made later this year
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BMS project is going a little slow and has not yet reached meaningful status. (I notice that references to SIBROS, BMS, TYW etc. have disappeared from the presentation)
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The focus areas for the company are two wheelers, commercial vehicles and off road vehicles with limited ambition in passenger vehicles.
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The Rs.600 crore capex plan is on track of which Rs.200 crore would be in the current year. Capacity utilization at the current level is almost about 85 %. Capacity is being increased at Pune and upgraded in Coimbatore and Manesar. Asset turnover for the current year’s expansion would be around 4 to 4.25 times
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The management says company commenced new business with HMSI which is going to significantly increase top line in the coming years. Most of it is going into production 18 to 24 months from now.
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Revenue guidance on the organics side seems to have been scaled down to Rs.3,200 crores from Rs.3,600 crores earlier while the Rs.400 crore inorganic piece remains. Reason for the downgrade seems to be lower export revenues on account of slowdown in the U.S. and Europe.
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Sri City plant at Chittoor is dedicated for EV cluster manufacturing but the products are broadly propulsion agnostic since except the fuel level indicator, nothing else changes.
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In Housekeeping, one analyst pointed out increase in provisions – there is a sharp increase in employee provision from Rs.15 crore to Rs.19 crore. Similarly, warranty provision has increased sharply from Rs.11 crore to Rs.26 crore. Other Expenses were higher due to Minda litigation apparently. (But shouldn’t these costs be borne by the promoters? Not sure why they are charged off to the company).
Despite the slight scaled down guidance, business outlook for Pricol remains strong with good visibility going ahead. Two-wheeler sales have remained strong in the current year – in April they grew 34 % while May appears to have been mixed. The stock has been re-rated from a P/E of 22 X in March last year to 37 X currently.
(Disc.: Invested)
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