Pricol extends gain, at new high after Aditya Birla Sun Life MF buys stake

Shares of Pricol hit a new high of Rs 139.50, up 4 per cent in Friday’s intra-day trade, gaining 9.5 per cent in the past two days in an otherwise weak on fund buying. The stock of the auto parts & components company surpassed its previous high of Rs 138.40 recorded on Monday, January 17, 2022.

On Wednesday, January 19, Aditya Birla Sun Life Mutual Fund Pure Value Fund purchased 1 million equity shares representing 0.82 per cent stake of Pricol at Rs 126.50 per share via bulk deal on the NSE, exchange data showed. Vramath Financial Services Private Limited sold 1 million shares of the company at price of Rs 127.89 per share, data showed.

In the past one month, the stock of Pricol has outperformed the market and by ralling 27 per cent, as compared to 4.7 per cent rise in the Nifty 50 index.

Meanwhile, Pricol on January 13, 2022 said that rating agency ICRA reaffirmed ratings of instruments of the company with a stable outlook. ICRA said that the reaffirmation in ratings takes into account Pricol’s (erstwhile Pricol Pune Limited) (Pricol/the company) strong revenue and margin growth in FY2021 and H1FY2022, anticipated healthy business prospects over the medium term and comfortable debt metric.

In FY2021 and H1FY2022, Pricol’s revenues benefitted from deeper penetration across various auto sub-segments following improved wallet share in Driver Information Systems (DIS), introduction of new products like the fuel pump module from April 2020 and re-entry into the PV segment in FY2021 following expiry of a non-compete clause with an erstwhile JV partner.

The company’s revenues are exposed to segment concentration risks with majority of revenues from the 2W segment. However, increase in wallet share and new customer additions in the CV/PV segment both domestically and overseas, mitigates the risk to a large extent. Pricol also has an early-mover advantage in electric vehicles (EVs), and this is likely to benefit the company both in terms of realizations and volumes, as EVs penetration increases.

While there could be some headwinds because of the ongoing semiconductor shortage and commodity price inflation, ability to pass on price hike to the OEMs (albeit with a lag of three to six months) and structural cost reduction undertaken are likely to result in healthy margins. With anticipated healthy accruals and no debt-funded capex plans in FY2022 and FY2023, ICRA expects Pricol’s consolidated coverage metrics to remain healthy over the medium term.