Buy This Multibagger Small-Cap Auto Ancillary Stock For Target Price Of Rs 200: ICICI Direct

ICICI Securities, a well-known brokerage firm, has recommended 'buy' the stock of Pricol Limited for a target price of Rs 200 apiece. The sock has the potential to gain 17% in 12 months if investors buy the stock at the current market price. It is an Auto Ancillary sector small-cap company having a market capitalization of Rs 2,085 Crore.

Pricol Ltd (Pricol), established in 1974, is a Coimbatore-based supplier of diversified auto components like instrument clusters, sensors & switches, pumps and mechanical products, telematics solutions and wiping systems.

Product mix: - ~65% from 2-W, 3-W, ~15% from CV, ~10% from PV, ~10% from off-road & tractors .
Segment mix: - ~55% from driver information system (instrument cluster), ~30% from actuation & fluid control system, ~15% sensors and others.

Stock Outlook

The current market price (CMP) of the stock is Rs 170.85 apiece at the time of writing, it was opened at Rs 167.20 apiece. The CMP is trading Rs 96.6 above the 52 week low and Rs 2.15 below the 52 week high, respectively. The 52-week low of the stock is Rs 74.25 apiece recorded on August 23, 2021. The 52 week high is Rs 173 apiece recorded on August 24, 2022.

Returns on Investment

In the past week, the stock surged 5.06%, whereas, in the past 1 month, it surged 15.07%. In the last 3 months, the stock gave a positive return of 52.97%. Over the past 1 year, it gave a multibagger return of 113.18%. In the past 3 years, the stock gave a whooping multibagger 615.66% return and in the past 5 years, it gave a multibagger 115.46% return.

Q1FY23 Results

Pricol reported steady Q1FY23 results.

• Total operating income came in at Rs 445 crore, up 7% QoQ.
• EBITDA margin came in at 11.7%, down 63 bps QoQ.
• PAT was up 20% QoQ at Rs 20.6 crore, supported by lower effective tax rate.

Buy for a target price of Rs 200

"The stock is up 2x+ since our initiating dated April 2021, outperforming the broader Nifty Auto index in that timeframe. We retain our BUY rating on Pricol amid management walking the talk over debt reduction plans, new tie-ups as well as ambitious Vision 2025. Upgrading our estimates, we now value Pricol at Rs 200 i.e. 20x P/E on FY24E EPS of ~Rs 10.0/share (earlier target price Rs 140)," the brokerage has said.

Key triggers for future price performance

• De-leveraging of b/s along with target of being debt free by FY24E. Sweating of assets, healthy cash flow generation and calibrated capex spends.
• Growing presence in PV space with clients like Tata Motors, Citroen, etc.
• New product pipeline and confirmed LoI from customers (including new age EV OEMs) to help boost sales, PAT to grow at 17.5%, 48.6% CAGR, respectively, in FY21-24E. Margins seen improving to 12.5% by FY24E.
• Recent technology tie-ups for battery management system (BMS) with BMS Powersafe and foray into connected clusters (incl. Telematics) with SIBROS.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.